Figuring out how to get a loan with bad credit is a pain in the butt, but there are a couple of fairly easy things that you can do to increase the odds of getting approved. One of these is to have someone who has good credit to cosign the loan with you. This is a risky maneuver for reasons that we’ll cover towards the end of this post, but is extremely effective. Let’s examine how all of this works.
Using a cosigner on a loan is something that shows the lending institution that someone else has faith in you being responsible enough to pay a loan back. It also gives them someone else to come after should you not pay the loan back.
During the application process, their credit score is run and analyzed to make sure that they have a good enough score to cover how bad yours is. The interest rate doesn’t defer to the kind of rate that the cosigner would have got if they applied on their own, but somewhere in between good and bad credit rates.
The problem with using this method is that if you don’t pay the loan back you are screwing over whoever your cosigner is. Defaulting on a loan isn’t the kind of thing that someone with good credit wants to deal with, they’ve worked hard to maintain their score and want to keep it preserved. Weigh your options very carefully when deciding who you want to approach to sign on your loan, and be absolutely, positively sure that you are going to be able to make all of your payments for the life of the loan. Not only will you ruin their credit score if you don’t pay your loan, you will probably ruin a relationship as well.
While this is probably the easiest way to get a loan with bad credit, it is also the riskiest. You are running the risk of ruining someone elses finances and relationship with with you. If you make this decision, make sure it is a smart one!