Getting a loan for your business when you have bad credit can seem like an hopeless task, especially if you don’t want to be paying extortionate interest rates. However, if you are close to losing hope, you will be pleased to hear that there are ways to get a good loan with bad credit.
There are lots of simple steps that you can take to make yourself and your business more appealing to potential lenders, all of which are detailed below.
Know your credit score
If you do not know what your current credit score is, this is the first part you need to check. Many people prefer to bury their heads in the sand when it comes to their finances but, if you want to get a loan, you need to know where you stand as a borrower.
There are several resources that you can use to check your credit score, including Experian and Equifax, both of which are credit bureaus.
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Understand the costs involved
Before you start applying for loans, you need to make sure you are fully informed about any costs involved as this will help you to work out what you can and can’t afford.
When it comes to loans for those with bad credit, the interest rates tend to be higher as you are more of a risk than someone with a good credit rating. As well as the interest rates, you also need to be aware of origination fees that can differ quite a bit from one lender to another.
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Compare terms and conditions
Before you sign on the dotted line, make sure that you have thoroughly read the terms and conditions of your loan and that you are happy that you have found the best possible deal based on your financial circumstances.
As someone with bad credit, you will probably have to use a lender that specializes in bad credit loans; but that doesn’t mean you should pay over the odds. Take the time to shop around for the best private money lending deals and don’t be afraid to turn down bad offers.
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Consider a co-signer
If you want to improve your odds of getting a loan with favorable interest rates, you may want to consider adding a co-signer to the agreement. Ideally, you want to use someone who has an excellent credit score and rating as this will help to boost your less-than-desirable one.
Many borrowers choose to enlist the help of a family member or close friend for this, which is fine, as long as everyone is happy with the terms and conditions set out by the loan provider.
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Sign up for credit counseling
Credit counseling is a service designed for people with bad debts that helps them to pay down their debts faster. If you have any personal debt that is affecting your ability to get a business loan, this can help you get on top of your finances and give you a better chance of borrowing money for your business.
You can find credit counselors who require payment for their services, as well as ones that are available free of charge through charitable organizations.
