Can Poor Credit Prevent Borrowers From Getting a Loan?
NEW YORK, February 7, 2023 (Newswire.com) - iQuanti: Borrowers with poor credit scores in search of a loan may feel discouraged to the point of not applying, but the reality is there are plenty of loan options out there with less strict requirements. While the process may look slightly different, the primary takeaway is that there are lending options designed to benefit those with poor credit. Here are a few of those options, along with some ways a borrower can boost their approval chances.
Loan options for borrowers with poor credit
Here are some loans applicants with poor credit can consider:
Payday loans can help borrowers obtain a few hundred dollars to cover expenses between paychecks. Then, borrowers will repay what they owe in two to four weeks. Because these loans have shorter terms, they often come with higher interest and fees.
Many times, payday loans look at factors in addition to a borrower's credit score, like employment history and income. Payday loans for bad credit are great options to secure short-term funding in a pinch.
Title loans are secured loans that allow a borrower to put up their car as collateral to help bolster their chances of approval. Since these loans are secured, they are less risky to lenders. So, borrowers with poor credit can easily get approved.
If approved for a title loan, the borrower can keep driving their car as they repay what they owe. But borrowers should be aware that failure to repay the loan may result in losing their vehicle.
Pawn shop loans
Similar to a tile loan, a pawn shop loan uses collateral to help ensure that lenders are repaid the borrower's debt. The borrower can provide a valuable item as collateral in exchange for funds, such as jewelry and artwork. If the borrower fails to make payments as they are supposed to, then the pawn shop has the right to keep or sell the collateral to cover the costs of the outstanding loan.
How to increase loan approval chances with poor credit
There are a few ways a poor-credit borrower can boost their loan application. The tradeoff is using other qualifying markers to appear as a qualified borrower:
Get a cosigner
A cosigner acts as a safety net for lenders who may be reluctant to approve an applicant with a low credit score. If a cosigner attaches their name to an application, they become directly liable for the loan in the case that the primary holder fails to repay the loan. Because the cosigner is typically someone with a higher income or credit score, lenders may be more comfortable lending to a borrower with poor credit.
Putting up collateral when taking out a loan, such as a title or pawn shop loan, functions similarly to having a cosigner. The collateral is a safety net for the lender to have a fallback in case the borrower doesn't uphold the terms of the loan. If the borrower can't keep up with payments, the lender is able to take the collateral and sell it to cover the balance of the loan.
The bottom line
Despite the misconception, borrowers with low credit scores do have options when it comes to securing loans. In fact, there are specific lending choices designed to accommodate borrowers that don't have the best credit history. Whichever lending option a borrower decides to go with, they should verify the requirements and likelihood of approval with the lender.
Those looking for efficient, stress-free funding can rely on Advance America. Advance America offers loan options for borrowers with any credit score, helping to provide funding to those most in need. Visit AdvanceAmerica.net to apply today.