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Bad Credit Doesn’t Stop You Borrowing Money – Here’s Why
It’s easy to assume that good credit is a requirement whenever you’re trying to borrow money. After all, what kind of lender would want to take the risk of lending money to someone who has a history of not making payments?
That’s certainly a logical way of looking at it but it isn’t always a valid viewpoint, as there are some lenders who are willing to overlook your poor credit history, especially if you’re not trying to borrow a large amount. One of the biggest problems with having bad credit is the difficulty that comes with getting approved for a loan or any other type of financing.
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The inability to gain access to funding only makes matter worse, especially when you need money now as you can’t get any help with new bills and repayment obligations. As such, you can find yourself spiraling into a perpetual cycle of poverty, with no way to find relief in times of financial desperation.
Luckily, there are still a few options left that can help you borrow the money you need, even if your credit isn’t so great. In this guide, we’ll explain why bad credit doesn’t have to stop you from borrowing money and we’ll discuss some of the ways people with poor credit can still borrow money in today’s credit-centric world.
You Can Use Your Proof of Income
If you can prove that you have a steady source of income – whether it be from a job, assistance, investments, inheritance, or any other revenue stream – you should have no problem getting approved for bad credit loans. The best kind of proof of income will usually be official monthly statements from your bank and check stubs from your employer. Generally, most lenders will want to see that you’ve been employed for at least 2-3 months consecutively.
Payday lenders are known for basing their decisions primarily on proof of income. However, to gain approval for a payday loan, you will usually need an active checking account that accepts direct deposits. The lender will use your direct deposit info to automatically withdraw the agreed-upon amount after each of your upcoming paydays. The amount you’re allowed to borrow will be proportionate to the amount you earn during each pay period but will not be determined by conventional creditworthiness factors such as your credit score or the contents of your credit report.
Some Lenders Don’t Consider Credit at All
Believe it or not, many alternative lenders don’t even check your credit when determining whether you’re worthy of approval. As mentioned above, proof of income is typically their primary concern. They’ll look at how long you’ve been employed by the same employer and how many months you can prove that you’ve been getting paid by them.
They’ll also consider your overall monthly expenses and income amount to see if you’ll be able to afford the scheduled repayments. Examples of lenders who don’t check credit include payday lenders and poor credit personal loan providers. If you have a stable income that can be reliably proven and verified, your credit report probably won’t stop you from being approved by the lower echelon of lenders who are constantly competing for borrowers.
The Alternative Loan Market is Growing
A decade ago, it was difficult to find any kind of lender that would approve someone with bad credit. However, a lot changed in the 2010s as banks and lenders entered into heavy competition following the global financial crisis of the late 2000s. The past few years have also brought the appearance of many alternative finance apps and digital banks that don’t refer to ChexSystems when screening new account applicants.
Every year, there are new lenders and organizations getting into the alternative lending space. With a bit of research and diligence, you could find some of those newcomers who are urgently searching for their first eligible borrowers. This is great news for anyone who has been turned down by their local banks because it means that there’s an ever-growing sea of alternative lenders out there just waiting to approve your application.
It can take 84 months for a negative item to disappear from your credit report, but it only takes a couple of months of late payments to create those negative issues. As a result, many lenders have begun offering more lenient approval terms that don’t rely solely on credit.
Crowdfunding Sites Offer Fundraising Opportunities Regardless of Credit
If you’ve already exhausted your options in terms of applying for bad credit loans for $2500, you could check out some of the top crowdfunding sites. These platforms give you a convenient way to set up a personal or business fundraising page where you can take donations for a cause or venture that you need help with.
Your credit will never be a factor when you’re signing up for a crowdfunding site, yet you could wind up raising tens of thousands of dollars or more with the right backstory and a good marketing campaign. On that note, keep in mind that crowdfunding sites aren’t automated streams of free money – you will still need to push visitors to your campaign page in order to attract the attention of prospective donators. Eventually, if your campaign becomes popular enough, it could be featured on the crowdfunding site’s homepage. There have been some amazing success stories about people who have been able to raise life-changing sums of money on crowdfunding sites within a matter of weeks or months.
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You Can Still Get Secured Loans
If you’re looking for a loan that will help you rebuild your credit without requiring you to have good credit to be approved, applying for a secured loan would be your best bet. With this loan type, you would make a cash deposit to serve as collateral for the loan. Typically, this deposit will be equal to the amount you’re borrowing.
Giving a lender money to let you borrow some back from them might seem counter-intuitive, but even though you’re really only borrowing your own money back it’s still useful for increasing your credit score. Thus, in a way it is helping you gain access to unsecured loans so that eventually you’ll be able to borrow money without having your bad credit stand in the way.
Secured bad credit loans are great options for anyone who is trying to be approved for large loans and lines of credit, as they’ll help you initiate the process of increasing your score to the level it needs to be in order to qualify for more premium borrowing services. While the limits will vary, secured lenders are willing to let you borrow any amount equal to the cash deposit you’ve made up to $10,000.
You Can Pawn Your Vehicle Title or Other Property
Pawning an item or asset can help you borrow money even when you have horrible credit. If you’ve reached the end of your rope and you have no other options left, pawning your vehicle title could give you a nice lump sum of cash, especially if your vehicle still has a decent blue book value.
You’d still be able to drive your car after the vehicle title has been pawned. The only catch is that it could be repossessed by the title pawn place if you default on the loan. Also, these are typically short-term loans that must be paid back in just 30 to 90 days, so it’s not wise to pawn your vehicle title unless you’re sure you’ll be able to meet the repayment obligations on time.
The Kinds of Negative Remarks on Your Credit Report Also Matter
Sometimes your credit score alone isn’t enough to deter a potential lender from letting you borrow money. Instead, they’ll also look at the kind negative remarks that are on your credit report. If you’ve got major issues like defaulted auto loans, utility bills, bankruptcies, repossessions, evictions, or other serious financial problems on your record, you’ll find that gaining approval for any kind of $1000 loan will be much more challenging.
On the other hand, if you have poor credit simply because you didn’t pay a couple of small bills a few years back or you have an insufficient credit history, many alternative lenders will be willing to overlook such petty issues. Also, some lenders may give you a break if the items have been on your report for more than five years, even though it will take a full seven years for them to no longer show on your report.
Most lenders just want to make sure you don’t have any large unpaid loans on your credit. A couple of delinquent credit cards from five years ago won’t have nearly the same impact on their decision as an auto loan that was defaulted on in the past year. In closing, before you assume that your credit report isn’t shiny enough to grant you approval for a loan, you might want to reconsider the severity of your credit situation because it might not be as bad as you thought.
