The most obvious solution to money problems is to get a small loan, but while it may seem simple and straight-forward, sometimes it can be difficult to get approved for financing. There are a few reasons for this. A lot of people struggle with affordability, and credit score is also a major concern. But even if it can be hard for some people to get financing, it's not impossible, and there are things one can do to improve their chances at being approved for a small loan.
You Have Bad Credit
Your credit score and history are important, because they dictate whether or not you are eligible for certain loans and financing options. Why is that? Because credit is an indication of your financial behavior so far. If you've taken poor financial decisions, it's going to show. Similarly, if you're brand new, you will have no credit history to speak of, which can raise some red flags that create distrust from lenders.
What did you do to damage your credit? There are several things that can cause your score to take a hit - late payments, skipped payments, previous loans you've defaulted on, bills that have gone to collections, etc. Each and every one of these behaviors can damage your credit significantly, so be careful.
What can you do?
a) Get a loan with bad credit
Fortunately for you and other potential borrowers in the same boat, even though a poor score can mean that you are rejected, small loans for bad credit do exist. But of course, there's a catch - you need to really look into them and do thorough research to find the best offer.
You also need to be aware of some drawbacks, like the fact that you will almost certainly need to pay a high interest charge, and that you may be limited in terms of amount borrowed or repayment term. The high interest rate is necessary to secure the loan, since you represent a high risk for the lender. But if it's your only option, it may be a reasonable trade-off.
b) Get a loan with no credit check
Another option you may consider is to get a loan that requires no credit check at all. That's right; you may be able to get financing without having your credit score come into play at all. But again, that comes with a caveat - you may not be able to get the full amount, and even though a credit check won't be performed, you may undergo other checks.
c) Improve your credit score
Finally, if the options for bad credit aren't to your liking, then maybe you would like to go the other route and simply improve your credit score instead, in order to open up more possibilities for financing. Here are some things you can do to get your score up to snuff:
Repay previous debt
The first thing to do is, obviously, to take care of any previous outstanding debt you may have. That is the number one killer when it comes to credit scores, especially if it goes to collections.
Use soft searches
Did you know that if you apply for loans and get rejected, it affects your credit? That's why it's good to do a soft search, which allows you to see whether or not you would be eligible for a loan, but without actually making a credit inquiry.
Pay bills on time
Staying on top of your bills can make all the difference. You can even set up direct debits to make sure that your money goes out on time every single month.
Check your housemates' credit
If your finances are linked to someone else's, like someone living with you, that can be a problem. Even if your credit is good, what about your spouse's? A lender might judge your financial situation based on their poor credit history.
All in all, a small loan can be hard to get, but that doesn't mean you should stop trying. There are ways around it and you just need to inform yourself regarding your options.