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By Marie-Claire Smith
When you need money, having a lot of bad debt can work against you. The world of finance is a paradox: the less money you have, the harder it is to get money. But the more money you have, the easier it is to get money. Very strange.
In fact, the situation is not just strange, it is downright inconvenient and frustrating if you need a loan. Whether you need a loan to pay off some bills, buy a car, help out a family member, or you just need some extra cash right about now, having bad debt can hurt your chances of qualifying.
The Vicious Cycle of Bad Debt
A vicious cycle is any situation that just seems to spiral from bad to worse. A good example is getting sick. If you get sick, you are less able to take good care of yourself, which can lead to more sickness.
Having bad debt is a lot like that. When you carry debt for a long period of time, your credit score usually suffers as a result. In turn, a poor credit score makes it harder to qualify for a loan. Or, if you do qualify for a loan, your bad credit score will drive up your loan interest rates significantly. This means you will have higher loan payments, keeping you in debt longer. The vicious cycle repeats itself again.
Getting a Loan and Your Credit Score
The number one determining factor in your qualifying for a loan is your credit score. If you have a FICO score above 700, you have little to worry about. If your score is between 600 and 700, you will likely qualify for a loan but you will end up paying higher interest rates. And, if your score is below 600, you may not qualify for a loan at all.
The unfortunate fact is that most lenders focus heavily on the credit score when deciding whether to fund a loan.
3 Tips for Getting a Loan Even With a Lot of Bad Debt
If you are saying, “I have a lot of bad debt but need a loan,” here are 3 tips that can help:
1. Your credit score is a major factor in 99% of lenders’ decisions: For the vast majority of lenders, your credit score is the end-all, be-all of determining factor for whether or not you qualify for a loan.
2. Some lenders consider other factors: Fortunately, about 1% of lenders (but still hundreds of companies) focus on additional factors. These “bad credit lenders” have made a business out of seeking out bad credit individuals who carry a lot of debt but still need a loan. Your first step in getting funded is to look for lenders who advertise that they work with individuals with bad credit scores.
3. Start by preparing documents that prove you are credit-worthy: Of course, these lenders will not just lend money to anyone that sticks out their hand. You are going to have to fill out some paperwork (in person or online). And, in many cases, they will want to see other indicators to determine whether you are a credit risk or credit worthy. Example include showing that you have a job or were recently employed, you have maintained a residence for a period of time, etc.
Follow these 3 tips when looking to get a loan even though you have a lot of bad debt.
About the Author: Get access to a list of bad-credit lenders near you at:
Bad Credit Loan Specialists
.
Source:
isnare.com
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