These days, it can still be possible for people with poor credit to get approval for their loan applications. Here are five ways that can help you increase your chance of obtaining a loan approval despite your poor credit score.
Loans Approval Process
1. Apply for a loan from a credit union.
While most lenders use credit scores as basis for approving loan applications, credit unions will be more sympathetic and considerate to lend money even if you have poor credit. Such organisations derive money from individuals and other investors, not from banks. But those are still profit groups. Credit unions, no matter how compassionate, will still aim not to lose money. Those can set specific criteria to approve bad credit loans.
2. Use security or collateral.
Having any asset like your home, land, car, or boat can be an advantage. You can use any of those as collateral to secure your loan. Most loan providers will be more than willing to provide you loans and implement competitive or lower interest rates. However, the loan amount may directly depend on the equity or valuation of the collateral. Just strive harder not to fall into default as it may lead to repossession of the property.
3. Find a guarantor or co-signer.
You can instantly increase your chance of getting a loan approval even if you have poor credit if you can have a guarantor of co-signer, who has a good credit score and constant source of income. You may ask your family members, relatives, or close friends to do the favor. Just be aware that if you will default on the loan, your co-signer will be forced to pay the loan amount on your behalf. Convince your guarantor that you have no intention to put him/her into a compromising situation.
4. Try to correct your credit report.
If you have doubt about your credit score, have it checked. There can be significant errors that are currently affecting your credit rating. Poor credit may be due to previous unpaid bills that had already been settled. Or your record may have included loans or delinquencies that you really did not incur. Credit rating agencies may also commit errors in reporting. Don’t worry because they are also open to correcting their own mistakes.
5. Declare or present your savings account.
There is no need to have huge savings. Even with small savings, you can possibly prove to loan providers that you are financially stable and you are on track to rebuild or improve your credit record. This can also serve as an assurance that you will have funds to repay your loan if ever you experience a shortage on your regular or fixed income.