Removing the Roadblocks of Bad Credit: Strategies for Securing a Personal Loan

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Life has a way of throwing us surprises. Whether you are suddenly facing unexpected home or vehicle repairs, you have a destination wedding to attend, or it is the perfect time for you to launch a start-up, you need a personal loan. If your credit history is less than stellar, do not fear. There are ways to obtain a personal loan no matter what your credit report says today.

Step one: Know where you stand

It’s a good idea to check your credit score on an annual basis, to make sure there are no inaccuracies in the information. If you aren’t checking your credit report every year, you may not know if you have been a victim of identity theft or some other incident that has a negative impact on your credit rating. When considering borrowing money, it’s important to consider your loan options. Many unsecured personal loans do not require that you put up collateral. And unlike equity investments, you can maintain ownership of your company with a short-term, unsecured business loan.

Step two: Continue to improve your status

There is a preparation process to applying for a personal loan. After you have checked your credit report and handled any inaccuracies, you need to take a look at how you can improve your rating by paying off debts above 30% of your overall allowable amount. Maybe there is a smaller loan you can pay off now – like a credit card balance or a car loan – in order to improve your credit score. By doing this now, you will be setting yourself up for loan approval and showing that you are a dependable borrower. Make sure that any potential lenders are pulling a “soft inquiry” on your credit report, rather than a hard inquiry. Too many requests for your credit history will have a negative impact on your score.

Step three: Set yourself up for success

If your credit history is not ideal, you will likely be looking at a high-interest loan. You may still get approved, but in order to mitigate risk, the lender may be forced to charge you a higher interest rate. With this in mind, you need to make some changes to your monthly budget. While you are paying off this loan, you need to be in a “needs vs. wants” mentality. Reduce your extra spending on unnecessary items. Have friends in for games and movie nights instead of meeting at the bar. Host dinner parties instead of eating out. Put off larger purchases until a day when you are in a better financial state. Pay off the loan in larger amounts than requested, and the balance owing will disappear quickly.

Don’t be discouraged if you are facing a financial challenge and need to apply for a personal loan. The process of preparing your credit report, adjusting your budget and repaying the loan will set you up for a brighter financial future.

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