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How To Qualify For A Second Chance Loan For Bad Credit

Getting a second chance loan for bad credit may not be the easiest thing in the world. However, there are things that you can do to maximize your chances.

Here are some of the factors to keep in mind that can improve your chances of getting a bad credit second chance loan.

Industry/Area Specific Bad Credit Personal Loans

Depending on the type of bad credit loan that you are looking for, you may find industry or area specific loans that you can more readily be accepted for. There are also banks that offer second chance loans, and some may be done through programs that target certain industries. The lenders typically cater to people with similar industry-specific needs and credit ratings. Since they are familiar with working with others like you, they will be more open to lending to you, despite a low credit rating. For example, many credit unions offer personal loans to their members.

You will still have to meet their minimum requirements of these second chance loan for bad credit companies or organizations, but they are more likely to want to do business with you because you are a member of the organization. Others include car, student and small business loans, where there are organizations that are committed to working with people getting a loan based on these needs.

 

 

Before applying for the loan, try to find out as much as you before you submit an application. For example, you may be informed that their typical loan amounts are up to $5,000 with a FICO score of 600 and above. That way, you can prepare yourself and maximize your chances of getting approved even before applying for the loan. This leads us to the second factor.

Cleaning Up Your Credit

In order to know where you stand, it is important to get an idea about your credit score. Your credit may be bad, but there be opportunities to improve how your profile look to loan lenders. Do this before you even apply for the loan. You can order a copy of your credit score at one of the three credit consumer rating agencies, Experian, Equifax and TransUnion. Better yet, get reports from all three, as there will be variations in their records and scores.

Some lenders have minimum credit scores that they look at, so if you can find out beforehand what your score is, you can better understand your chances of being approved. If you have some lead time before you really need to loan, you may also be able to work on getting your credit score up before you apply for the loan.

Some lenders access indicators like your debt to income ratio. If you have that information, you can make adjustments to improve your financial picture before you submit your loan application.

Having Employment

Second chance loans for bad credit are granted based on your ability to pay back the loan. People who have employment are considered to be in a better position to to repay the loan. In addition, the longer you have been consistently employed, the better it could look on your loan application. Verification of employment is usually done through pay stubs, W2s and account statements from banks. A popular category of second chance loans based on employment are payday loans that do not require a collateral.

Pledging Collateral

We all prefer to get loans without collateral, but sometimes that is just not possible. When lenders make loans out to individuals, they take on the risk that their loans may never get repaid. This is especially so for bad credit second chance loans, as the borrowers already have a record of poor credit worthiness.

To alleviate the risks and make it palatable for lenders to take the risk of lending money to you, you may have to pledge your assets, such as the car, boat or home. Jewelry, gold and other valuable items are commonly used as collateral in pawnshop loans.

Get A Co-Signer

You may not have the minimum FICO score that the lender requires, but perhaps a family member, relative, close friend or business partner have better credit that meets the lender's requirements. In this case, you are in luck if that person is willing to co-sign the loan with you.

By co-signing, they guarantee to the bank or lender that if you fail to make the payments, they will make it up for you. This requires the co-signer to undertake the risk that you are trust-worthy enough to repay the loan or else they are on the hook. But if you are able to convince them, then it makes it a lot easier for your loan to come through.

Have Documentation Ready/ Be Prepared To Explain Your Situation

Whichever type of loan you may be looking into, always be prepared to provide all the documentation such as pay stubs, bank statements and other documents detailing your financial history. Always be prepared to provide a clear explanation as you how you intend to use the money from the loan, and why you are capable of repaying, despite your bad credit.

Being organized and providing all necessary documentation in your application helps to speed up the loan approval process. It also paints a picture to the lending officer that you are a financially responsible individual who is capable of paying your bad credit second chance loan obligations. You are not someone needing a loan, but fully qualified to deliver on your obligations.

Check out this related article: Second Chance Loans For People With Bad Credit

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