Two Tips For Getting An Installment Loan Approved If You Have Bad Credit
Whether it's a large loan to pay for a home or a small loan to get you through next payday, installment loans are simply loans that have a predetermined payback schedule. But for people who have bad credit, obtaining a loan can be tough. Having poor credit can be a sign to lenders that you might have trouble repaying a loan, so you may need to put a little more work into a loan. Here's a look at two of the best ways you can increase your chances of getting an installment loan approved even if you don't have the best credit.
Have substantial collateral
If you don't have the best of credit, having collateral can greatly increase your chances of having an installment loan approved. What works best as collateral? Almost any major asset that has financial value. Loan collateral can be a car that's paid off (or a motorcycle or boat), equity in a home, jewelry, or more. When you put up collateral for a loan, it makes the lender more likely to loan money, as they'll take possession of whatever you've put up as collateral if you don't make payments on the loan. Having collateral gives the lender assurance that you're serious about paying the loan back.
Consider your debt-to-credit ratio
One of the biggest factors that can cause a loan to not be approved is the presence of a lot of debt relative to available credit. This is known in financial circles as a debt-to-credit ratio, and it's one of the biggest factors in lowering your credit score (and increasing your credit risk). It sounds obvious, but if you're applying for an installment loan, make sure that you've got as much debt (primarily credit cards) paid off as you possibly can. If you have to make sacrifices to pay this debt down, do so.
Just because your credit may have some problems, that doesn't mean you can't get a loan. It just means that you might have to do a little preparation beforehand. Be ready to have some collateral to put up to back your loan, and have as much other credit card debt paid down as you can possibly handle. One of the biggest advantages of getting a loan when you have poor credit is that obtaining a loan and paying it back on time can be a great way to help restore credit if you have been going through some financial issues.