Whether you’re a struggling employee trying to start your own business, a self-employed professional trying to raise capital, or someone who just wants the stability of a lower monthly payment, don’t let your finances hold you back. Taking the time to dig deep and find financing options that fit you and meet your needs is important.
A few things can boost your chances of getting loan approval, from offering a big down payment to adding a cosigner to your loan, even with a poor credit score. Here are some successful tips on how to get approved for loans even if your credit score is not as high as it should be.
1. Get Paperwork in Order
It’s not enough that you simply have an idea and want help funding it; make sure to organize your documents before submitting them for review and approval by lending institutions like banks and credit unions. Credit unions are especially helpful for those with poor credit scores and a history of delinquency because they can offer more affordable rates.
Most bad credit car loan applications are rejected due to a lack of proper paperwork. While most dealerships take care of the paperwork for the loan, it is always best to take this into personal account and ensure everything is organized and accounted for.
2. Offer A Big Down Payment
Lenders want to see that you are committed and ready to take on debt. Consider putting 20% or more down on the house, refinance a less secure vehicle into another one with a lower interest rate, or offer cash up front for business-related purchases of inventory, furniture and equipment. Your poor credit score may result from numerous late or missed payments due to lack of funds; or just plain forgetfulness.
3. Add Cosigners/Guarantor
If you have someone who can cosign for your loan application, the chances of getting approved improve. Having a cosigner makes you seem less of a financial risk because it adds extra accountability (in the form of someone else’s credit standing). Sharing the responsibility for your debt with a cosigner means you will have to pay less interest, which ultimately means you will spend less money in the long run.
4. Get A Personal Guarantee
Another way to add extra accountability is by getting someone financially stable and trustworthy to guarantee your loan. This person will put his/her good credit on the line so that if you cannot make payments, he/she will be responsible.
The amount of risk you take directly relates to the interest the lender is willing to accept to get paid back. Having a guarantor will boost your chances of getting approval by improving your credit score.
5. Inquire About Different Loan Programs
Often, lending institutions offer first-time home buyers and those with poor credit scores special loan programs that are more affordable and flexible than standard loans. Examples include loan discounts for acknowledging other types of debt, pay-as-you-go plans, and promissory loan options that charge a lower interest rate in exchange for a higher monthly payment.
Conclusion
Having a poor credit score doesn’t mean you are automatically denied; every lender is different, so you will want to give them a chance to see if they can back your idea or business plan. In the end, it’s important to find the right financing option for your needs at a rate that will work for your budget and goals.
