Ways To Get A Credit Union Loan When You Have Bad Credit
Getting approval for a bank loan can sometimes be a challenge, especially if your FICO score is less than stellar. Luckily, there’s an alternative form of lending that could help you get access to the funds that you need.
Choosing a credit union for bad credit lending could be an excellent way to get the loan you require without paying an extremely high rate of interest. Today, we’ll take a look at how these organizations work and what you’ll need to do before you join one.
How Credit Union Borrowing Works
If you’ve never been a union customer before, then you may be wondering how this type of institution works and what its criteria are for lending to new customers.
- A union is like a bank. However, it operates as a membership club. Unlike the usual lender-to-client relationship you might experience at a large financial institution, this establishment provides personalized service. It’ll go the extra mile to help you secure the type of banking or loans that you require
- Some organizations offer online applications and banking facilities but the vast majority will require you to visit their premises. This is especially true if you’re applying to be a member. These community-based organizations operate on face-to-face contact and relationship building. Once you’re a member, you can look forward to a banking relationship that could last a lifetime
What Loans Do Credit Unions Offer?
If you thinking of joining a union, you’ll be able to choose from three main types of loans:
- Personal loans. These products are ideal if you need to pay for emergency medical expenses, essential items, or debt refinancing. As a union customer, you may be able to secure a competitive APR and favorable repayment terms
- Credit builder loans. If you have bad credit or no financial history because you’ve just recently started working or graduated from college, you can opt for this type of borrowing. You may need to deposit an amount equal to the sum you intend to borrow with your creditor before you get the loan. Moreover, every on-time payment will be reported to the three main bureaus to increase your score
- Credit cards. This familiar type of financing is convenient, accepted around the world, and can be used both for retail purchases and cash advances. A union may help you to secure a card even if you’ve been rejected by your bank or a major card issuer in the past. You could also benefit from special offers like a 0% introductory APR or a loyalty rewards program
Ways To Improve Your Chances Of Qualifying For A Loan
If your rating is in a low category, joining a union may not be enough to guarantee that your application will be approved. To boost your chances of qualifying for financing, you may want to consider some of the strategies below.
- Use a cosigner. If you have a close friend or relative who has good credit, you could ask them to cosign your application to improve your chances of approval. However, it’s important to note that by cosigning, the other person is assuming full responsibility to pay your debt if you skip payments or default. You’ll want to make sure that you discuss the implications of this option in detail with this individual before you pursue this strategy
- Improve your score. Your FICO score is calculated using several factors: your payment history, account balances, the age of your accounts, the number and type of lending products you currently have, and your recent credit applications. You can improve your rating by making your payments on time, keeping your accounts open and in good standing, and not applying for too many cards or lending products at once
Alternatives To Credit Union Loans
If you’re unable to get the financing you need through a union, there are still several other alternatives you can explore.
- Home equity financing. If you’ve paid down your mortgage, you might be able to borrow against the equity you’ve created. With this option, you could benefit from a reasonable APR and a repayment period that could extend beyond a year
- Effective monthly budgeting. If your reason for applying for a loan isn’t urgent, then you may be able to save up the money you need by cutting down your expenses. Furthermore, try to boost your income over several months
- Bad credit personal loans. This option is one of the most ideal solutions for borrowers with low FICO scores. A bad credit loan is easy to apply for and you could have the funds you need within a day or two
The Bottom Line
Credit unions are community-oriented lending organizations that provide a variety of financing options to their members. Before you join one, you’ll want to find out exactly what lending products it offers.
Additionally, you’ll want to take steps to boost your score. To improve your chances of loan approval, you could also ask a trusted friend or relative with a good score to cosign your application.
