A poor credit score can hinder a person’s ability to access credit from mainstream lenders. Unfortunately, about 56% of American consumers have a low credit rating. Fortunately, there are other ways of accessing funds even with a low credit score. These include:
Compared to banks, credit unions have more lenient credit requirements that make them ideal lenders for consumers with bad credit. In addition, credit unions generally offer better interest rates compared to banks, according to figures published by Informa Research Services. At the same time, credit unions generally charge consumers lower fees than banks because they pass on their earnings to their members. Banks, on the other hand, are beholden to shareholders. For these reasons, a credit union is more likely to overlook a member’s poor credit history. It is worth noting that there are credit unions that serve specific communities or groups of people. A good example is the Navy Federal Credit Union, which serves veterans.
Technology has made it possible for people with bad credit to access financing from peer-to-peer lenders. This financing model allows one to borrow funds directly from individuals rather than an institution. To do so, a borrower joins a peer-to-peer lending platform and posts a loan request stating the amount of money required. In most cases, a borrower must state why he/she is borrowing money. Investors use this information to evaluate funding requests. It is up to the investors involved to select the funding requests they believe are viable and reject those that do not meet their funding requirements. Still, it is worth noting that peer-to-peer lenders also evaluate the credit scores of borrowers.
To access a secured loan, a borrower would need to put up collateral. Collateral is basically an item of value such as a car, property or even stocks. Luckily, secured loans tend to have better loan terms, lower interest rates, and access to larger amounts of money than unsecured loans. What’s more, repaying a secured loan within the stipulated period can improve a person’s credit score.
People with a low credit score can still get a loan from lenders who are more lenient with credit scores. Such lenders include credit unions, peer-to-peer lenders, or opting for a secured loan. This notwithstanding, an individual should make efforts to improve his/her credit score by making timely debt payments, reducing your credit debt and rectifying credit report errors.