Suppose you encounter an emergency that requires urgent financial intervention or want to meet other expenses like funding a wedding, going on vacation or home renovation repairs. In that case, you need to consider applying for a personal loan.
With a personal loan, you do not require collateral such as your car, house or other investments to qualify. The only guarantee the lender has to grant your request is your reputation.
However, it is critical to note that you will get higher interest rates when applying for a loan with bad credit. Suppose you utilize your loan appropriately; you may find it better than applying for payday loans, approaching pawnshops or using overdrafts.
Though it has its pitfalls, with proper information and knowledge you can take this loan and utilize it to your advantage.
How to get a $2,000 bad credit loan?
First, you must fill out the forms available online and patiently wait for feedback that may take a few minutes to several hours. Financial lending institutions for bad credit loans like Lendforall.ca may need additional information about your credit or other requirements in line with their policy.
Some of the requirements needed may include any of the following.
- You must be above 18 years.
- Verification certificate of your present employment address.
- Checking account in your name
- Citizenship or proof of permanent residency
- Generate a net income of $1,000 after tax deductions
- Valid email address
- Home telephone number
If your loan application is successful, you can withdraw the money directly from your bank account.
Tips on getting your loan approved
Check your credit score.
Desist from applying for loans that you do not qualify for because, every time you apply, it is documented on your credit history and may greatly affect your credit score. If your application is declined, the negative impact hits hard since the overall report will indicate a rejected application.
If you apply for credit, it may send red flags to the loan worker tasked with examining your application. Develop a habit of scrutinizing your credit report regularly to check for inaccuracies or false statements on it. If possible, make a formal request to receive your credit report at least every year to avoid surprises.
It is one thing to doubt about your bad credit and another to precisely know how bad it is. There are credit companies that not only offer free approximate scores but also do it repeatedly at no additional cost.
It is not mandatory to have an excellent credit score to qualify for a loan, but as your score degenerates, you will notice a drastic change in the rates and offers lenders are willing to give you – if they are willing to give you at all.
After updating your credit history, find out from your lender about their current guidelines when evaluating loan applications. Alternatively, you may consider visiting their website as this information is likely to be available there.
Take steps to improve your credit score.
Contrary to popular belief, a credit score is not stationary; hence, it is possible to improve it by making prompt payments, minimizing your debt to credit ratio, and avoiding late payments.
Your credit score is dependent on factors such as payment history, current debt balance, length of credit history, and new credit. While some of these factors, such as length of credit, are difficult to change, you should strive to boost your credit score.
Generally, credit score plays a key role in determining the interest rate your lender is willing to impose on you. Even though many lenders offer personal loans with minimal credit, you are likely pay higher interest rates.
Irrespective of your credit score, it is critical to compare multiple lenders’ charges and settle on one with the most competitive rates. With a low credit score, your loan request may be denied. However, you may need to reapply to a different lender to see if you can get one that will approve your loan application request.
How to calculate your debt to income ratio
Your debt to credit ratio can impact the rates lenders are willing to offer you, and therefore you may need to know yours before making an application.
Many lenders will calculate your debt to income ratio to determine how much your income is used up in servicing debt.
If you want to determine your debt to income ratio, divide monthly debt payments by gross monthly income. The lower the percentage, the better you’re chances because it is an indication that your debts consume a minimal portion of your income.
To effectively calculate your debt to income ratio, first list all your monthly debt payments that include automobile loans, child support, alimony, student loans, mortgages, personal loans, or credit cards. Household utility bills, car insurance charges and health insurance are not part of your debts.
Secondly, find your gross monthly income, which is the amount of money you receive before taxes.
Finally, by dividing monthly debt payments by monthly gross income, you will notice a decimal in the answer. Take the decimal two steps to the right to get a percentage and the debt to income ratio.
For instance, assume you want to purchase a house, and your gross monthly income is $5,000, and your monthly debt payments include a $200 personal loan, $200 student loan, and $400 automobile loan.
= debt to income ratio
Therefore, your debt to income ratio is low hence making you a preferred mortgage lender customer. Even though there is no connection between debt to income ratio and credit score, the two seem to have an interdependent relationship.
Credit scoring agencies use two vital factors to define a credit score: current debt balance and payment history, which determine the credit score percentage.
Although credit scoring agencies have no access to your income, they can deliberate on past payment history to evaluate your ability to make prompt payments.
Notably, mortgage lenders have a very austere debt to income ratio guidelines and requirements, the highest being 43%. While few mortgage lenders can approve a debt to income ratio above 43%, you will have to go overboard to prove the repayment capability.