Career Advice - A Community Blog

Erik Larson writes about the job market, resume improvement, and career advice

Funding Options for Bad Credit Risks

Written by Erik Larson, Community Blogger | Dec 27, 2017 10:00 AM

Your credit score has a huge influence on how easy it'll be for you to get credit offers. If you have a high credit score, then securing a loan won't be too hard, and you won't have to worry about paying high interest rates. On the other hand, if your credit score is low or nonexistent, then you may run into some trouble when trying to secure funding.

Lenders see bad credit scores as huge risks. As soon as they see that you have bad credit, they will immediately be worried that you won't be able to pay back your loan. Institutions that do offer you loans or other forms of credit will likely have you pay higher interest rates, since they want some type of compensation for the risk that they are taking.

Your chances of getting a loan or a different form of credit vary depending on the type of loan you're seeking. If you're looking for a personal loan, then you will most likely find a lender willing to give you a chance. Getting personal loans for bad credit is far less complicated than securing other forms of credit. This is mostly due to the fact that you will be provided with a detailed payment plan at the very beginning of your loan. In other words, you will be completely aware of your payment commitments from the start.

If you want to secure personal loans, you will have the option to seek them in three different places. Your first option is to go with traditional lenders, or in other words, ordinary consumer banks. However, note that if your credit score is too low, you most likely won't be able to secure a loan. Your second option is to go to small online lenders. Although it's easy to get a personal loan through online lenders, be aware that they often charge very high interest rates. Finally, you have the option of going to private lenders. Basically, private lenders refer to individuals willing to give you a loan at an agreed-upon interest rate.

If you're an entrepreneur who has a low credit score and is currently facing funding challenges, then you may need to start looking at non-traditional options. In order to get proper funding without having to pay insane interest rates, you will need to look beyond bank loans.

If you need financing in order to start your business, then you should ask for money from your friends and relatives first. You shouldn't be shy to ask for help from people who're close to you. A lot of small business owners became successful because they asked their friends and relative for financial aid. The reason why this is your best option is because your loved ones won't care about your credit score, as long as they trust you and/or believe in your idea.

If you're starting a new business, then you should never overlook grants and gifts. Although you will have to put in a lot of effort in order to get grant money, it will surely help you in the beginning stages of your company. Businesses that usually qualify for grant money are tech companies and health-care businesses.

Of course, it's always a good idea to search for different microlenders on the web. Microlenders usually offer smaller loans (somewhere between 5 and 25 thousand dollars). However, they're a great option for anyone with poor credit. On top of that, if you make timely payments, these online lenders will report the payments to credit bureaus, which will ultimately improve your credit score.

Although getting a loan or a different form of credit can be done even when you have bad credit, it's always better to try and raise your credit score before you seek a loan. This will help lower the interest rates that you get from lenders.

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