If you have poor or minimal credit, your chances of getting approved for an auto or personal loan arenï¿½t necessarily poor or minimal too. Here is what you can do to increase your chances of loan approval:
Donï¿½t assume you will be denied ï¿½ One surefire way not to get a loan is to never apply. But if you want to try, you first need to determine your credit score for yourself and go from there. If itï¿½s not where you would like it to be, donï¿½t be discouraged; there is still hope, according to John Van Alst, staff attorney for the National Consumer Law Center. Even two candidates with an identical score might not be the same in the eyes of a lender, he told Dana Dratch of Bankrate.com.
Furthermore, aim high. Depending on the type of loan, a certain credit score would be considered for a prime loan in some instances and for a subprime loan in others. Donï¿½t lowball yourself.
Shop close to home ï¿½ Start your loan search in the confines of your area, perhaps at a local financial institution. While they are similar to larger institutions in terms of services, smaller financial institutions tend to have more flexible lending standards than big banks or online institutions.
ï¿½A [smaller financial institution]ï¿½especially one affiliated with your employer or one that is community-basedï¿½may be willing to look beyond a poor credit history and make a judgment about whether it will loan you money based on your character and your promise to repay, regardless of if you have bad credit or not. Think of them in the way you would a small community bank from years ago,ï¿½ said the debt specialists at Debt.org.
If youï¿½ve been banking at the same place for years, thatï¿½s another good place to look, as they can attest to your character. However, donï¿½t settle for the first loan for which you get approved. Shop around to make sure you are finding the best option for you.
Limit your number of applications ï¿½ While you want to remain open to options, you also need to be vigilant about how many loans you actually apply for.
ï¿½Each loan application that you submit triggers an inquiry into your credit. And each inquiry lowers your credit score by a little bit,ï¿½ Lucy Lazarony of Credit.com explained.
Therefore, apply for a loan only from a lender that you trust with principled lending standards.
Get a co-signer ï¿½ Ask a person with whom you have mutual trust to co-sign on your loan. With a co-signed loan, the responsibility lands on both of you; if you default, it will hurt you both in the credit department, but if you stay current, it will help both your individual scores.
Go a different route ï¿½ There are numerous ways you can go about acquiring a loan: borrow from friends or family; tap into your home equity; try a secure loan; look into peer-to-peer lending (an online platform that allows you to borrow directly from another individual rather than from an institution); or research personal loan lenders, who generally work online and offer competitive loans for debt consolidation, home repairs and other necessities.
In the end, your best option would be to improve your credit score, but until that is possible, these tips provide a good place to start.