Are you looking for a 400 credit score personal loan? If yes then you know how challenging it can be. Anyone can end up with a low credit score either through poor financial decisions or out of bad luck. A credit score of 400 or just less than 600 is often considered poor credit. With a poor credit score qualifying for a personal loan can be tricky. You ask why? Most lenders take your credit score as an indicator of your credibility. In fact, some lenders won’t even consider your application if you have a credit score under 400.
However, the good news is that there are plenty of reputable lenders ready to extend you credit even with your poor credit score. But it is important to understand that their interest rates are normally higher. Furthermore, the interest rate will vary depending on your income and credit score which enables you to even qualify for a loan with an interest rate below 6%.
This is why it is advisable to compare your options and understand the terms of services of your lender before signing up for credit. A key advantage of low credit score personal loan is that they give you an opportunity to develop your credit score as you meet your financial needs with the funds. In this article, we provide you with some of the best companies that can provide you with credit even if your credit score is less than perfect.
What It Means To 400 Credit Score
When you use a credit account, all the activities in the account are reported to at least one of the main credit bureaus such as TransUnion, Experian, and Equifax. These bureaus can store your credit account details for up to 10 years in their vast consumer credit information database.
So, if you pay your loan bills, credit cards on time every month and keep your credit cards balances low then your credit score will improve. On the other hand, if you ignore your accounts, make late payments, and revolve around huge debt balances then your credit score drops fast.
All the credit activity that occurs on your accounts build a credit report that is used to come up with your credit score. A credit score usually falls between 300 and 850. The credit score is used to determine your level of credibility. While a credit score above 600 is considered good, a credit score below 500 is considered poor. This means that you might experience difficulties accessing loan with a 400 credit score.
Read on to discover some of the top 5 ways to get 400 credit score personal loan
1. Credit Union Loans
Credit unions are great alternatives for securing credit score personal loan if you have a low credit score. To allow you easily access personal loans, some of the credit unions have designed special programs with more-favorable terms that suit people with poor credit history. This is why it’s much easier to get a personal loan from credit unions. In fact, nearly anyone is eligible in some credit unions since eligibility can be as simple as being a member of a particular profession or residing in a certain location. Furthermore, most credit unions are not profit oriented which means you can expect to get cheaper financial loans and financial services that you’ll hardly find in profit-driven financial institutions.
Once you apply for a personal loan, credit unions don’t just look on your credit scores when deciding whether to extend to your loan. They consider your credibility and character. What’s interesting is that the interest rate doesn’t exceed 18% regardless of your credit score. Contrary, getting the same amount of loan from banks could attract as high as 36% interest. This means that enrolling in a credit union can enable you to save a substantial amount in the long run. The good thing is that most lenders can give you a loan even if you are still new. So, if you are comfortable with the terms that match with your credit history, then you can readily find a credit union willing to give you the loan.
Some of the top credit unions available today are for government workers, teachers, or veterans of the armed forces. You might want to ask around which credit unions offer loans in line with your profession considering that it’s easy to get the loans.
Benefits of Credit Unions
- More friendly lending terms as compared to banks
- Loans attract fewer fees and penalties than traditional banks
- You can get unsecured loans even with a poor credit score
2. Borrow from Friends or Family
Other than banks and credit unions, one of the ways of getting a 400 credit score personal loan is borrowing from friends or family. This method of borrowing can be quite handy especially when banks or credit unions are not willing to lend you money. Although borrowing from friends or family can jeopardize your relationship it can be quite helpful when in an emergency. Besides, most such loans are usually interest-free and negotiating the terms is relatively easier since you only need to convince the lender.
So, if you know a person with extra cash, then you can approach them and ask them for a loan. While getting the loan might be easy, it is important to have a formal loan that states the loan agreement and the repayment terms. It is also advisable to take loans which are reportable to credit bureaus since they provide you with a chance to rebuild your credit history and improve your scores. However, seeking out lenders outside the traditional can be risky. Apart from getting your identity stolen, some lenders can be expensive. Therefore, make sure you are working with someone you can trust before filling the application, entering an agreement or receiving any money. Once you are conversant with the terms, formalize everything with proper legal documentation. In fact, you can just assume you are transacting with a stranger. This will help you to avoid future problems that may arise in future with regards to loan terms or interest rates.
3. Get a Co-Signer
Is borrowing from a credit union, relatives or friends impossible? Don’t worry. If you know someone with good credit, then he/she can be your cosigner for 400 credit score personal loan. When you apply for a loan, lenders examine your eligibility based on your credit history to determine your level of trustworthiness. It’s not a surprise to be turned down due to poor credit score. However, a consigner can be of great help in such a situation. Your loan consigner is someone who vouches for you when borrowing a loan. This means that they agree to take responsibility if you fail to meet the repayments. Considering that they usually have a good credit score means they can repay the loan which makes it easier for lenders to give you a loan.
If your cosigner is qualified, the lender will develop loan terms depending on his/her credit score. Since the cosigner is responsible for the repayment, all the information related to the loan will be listed in your credit report as well as your cosigner’s. This means that both of you will suffer if you fail to repay or make late payments. But, if you become punctual with payments, then your credit score can greatly improve allowing you to borrow loans in future without the need of your cosigner.
Who Qualifies to Be A Cosigner For 400 Bad Credit Personal Loan?
When it comes to picking a cosigner, nearly anyone who has a steady income and an excellent credit score can become your cosigner. This includes your spouse, guardian, relative or even a close friend. However, they need to understand the risks associated with signing up as your cosigner, i.e. your cosigner is agreeing to repay the full amount if you default in repayment.
Who Gives Cosigned Personal Loans?
While only a handful of banks provide personal loans nowadays, Wells Fargo and Citibank allow cosigners. You can also get loans from credit unions or online lenders such as OneMain Financial, FreedomPlus, LendingClub, and Lightstream.
Steps Applying for Consigned Personal Loan
If you can’t get loans anywhere else, then you can take advantage of the simple two-step process of applying for consigned personal loan. First, you need to establish a reliable lender who has favorable terms then find a consigner. Starting with relatives can be helpful. Let them know that you fully understand the risk and burden involved and assure them on timely repayments.
4. Your Home Equity
If you have equity in your home, then you can qualify for a home equity loan. When you apply for the loan, you will list your home as collateral. A good thing about this loan is that you can access the loan regardless of how bad your credit score is. Additionally, the interest rate for home equity loans is low, and the interest accumulated by the home equity loan is tax-deductible. However, the amount you borrow might be limited, or the interest rate might be higher than average.
But it is important to remember that home equity loans are secured with your home. This means that the bank can take ownership of your home if you fail to repay the amount. However, these loans are a great alternative for people who are disciplined with a stable source of income. Lenders have different credit standards which enable you to access 400 credit score personal loan. This is why it’s important to consider the various rates and terms from different creditors.
Home equity loans also give you a chance to improve your credit score. Besides, the loan diversifies the types of debts included in your credit report which in turn raises your credit score. Furthermore, making payments on time enables you to rebuild your payment history thus enabling you to access credits in future easily.
5. Peer to peer lending
Also known as P2P lending is a type of loan that has been around for a while now. It allows you to borrow directly from a group or individual rather than an institution. P2P lending makes getting a 400 credit score personal loan easy since there is no strict adherence to your credit scores, something common with traditional lending institutions.
If you are interested in getting the loan through P2P lending, then you can look for a reputable online platform that enables you to source the funds. The platform acts as a meeting place that connects borrowers with potential creditors. If you are borrowing, then you just post a loan listing stating the amount that you need and what do you intend to use it for. If your reasons are convincing enough, then you can easily land on investors who are willing to extend the amount to you. The interest rate on loan is normal fixed and you have an opportunity to either accept or reject the loan offered before accepting the funds. Although your credit score still counts, the lending standards are relaxed, and the interest rates are lower as compared to those from traditional lenders. This makes with one of the best alternatives for a 400 credit score personal loan.
Although loan options with a 400 credits score personal loan might be limited, this doesn’t mean that they don’t exist. These ways of getting loans listed here are some of the best enabling you to get finance even with bad credit with a low 400 credit score. There are many outlets today available for people with bad credit, but it takes research to discover which ones are the best with favorable terms. Always consider the terms and interest rates to ensure that you won’t struggle with the repayment.
However, while there are plenty of options when shopping for a bad credit loan, your credit score still matters a lot. You should always aim at improving your credit score for quick loan approvals when you need financing urgently. Furthermore, your credit score affects the interest rates in the loan you borrow. This means that you are likely to pay more in the long run when you have a poor credit score and less if you have a good credit score.