What’s up, family? It’s your boy Ivan Hall, the credit king. Pre-qualification is a simple but crucial step in obtaining a loan with low credit. Obtaining a loan with terrible credit can be particularly aggravating because you most certainly require the funds, yet are more likely to be denied.
Pre-qualification, fortunately, can assist you in determining your chances of receiving the loan you require, while it may not always be the best idea to get a loan. If you have poor credit, sometimes it is a necessity. You may be seeking a loan for an emergency or unforeseen expenses, or to try and keep up with an older high-interest loan.
Unfortunately, the credit companies do not know the difference between a person with poor credit who is simply in a tight situation and a person with poor credit who simply has bad habits. They will likely look at the credit reports the same way, which means you are much more likely to be denied.
Because of this, any loan you can get will be tainted by your poor credit scores. You’ll likely only have access to high-interest rates or other unfair deals that make it much more difficult for you to pay back. Your debts Pre-qualification may not solve these issues, but it will give you an idea of whether or not you will be approved before you submit the application.
Pre-qualification also helps you find out the types of loans you’ll be likely to get, how much you’d be able to borrow, what your interest rate might be, and how much your monthly payment may be. Importantly, Pre-qualification does not go on your credit report, meaning you’d be able To gauge this information without taking a hit on your credit score, can you get pre-qualified for a loan with bad credit?
Higher Interest Rates
Before issuing you a loan, most lenders will want to check your credit reports. If you have bad credit, this is going to affect your chances of getting the loan. However, bad credit doesn’t automatically mean you will be denied your loan or that you cannot qualify for any loan. It usually means you will get a higher interest rate.
This means that you will end up paying more than usual as you pay off the loan. However, in some situations, the issue of a higher interest rate is worth it to solve the bigger issues you are faced with today. In many cases, it will still be a better rate than other emergency options, such as payday loans or cash advances.
With that said, anyone looking to get a loan with bad credit should still shop around to get the best deals. Applying for a loan typically requires the lender to pull up your credit report.
This is called a “hard inquiry,” and it will show up on your credit report. While one hard inquiry may not be much, A series of hard inquiries may take a toll on your already struggling credit score. On the other hand, pre-qualification is just a rough estimate of your credit status and the likelihood of getting a loan.
It does not require a hard inquiry, so it will not affect your credit score. Additionally, by pre-qualifying, you can see things such as the probable terms, payments, and interest rates without actually committing to anything.
Lastly, the pre-qualification process is much quicker than the application process. When you are truly in need of a loan, time is a very important factor. The pre-qualification process is simple, though there may be individual steps based on the lender.
A common example includes three steps:
- They fill out a pre-qualification request, including information such as your name, income level, financial situation, and how much you want to borrow. The lender reviews the request and does a soft inquiry into your credit. This is more like a peek at your credit report and will not affect your credit scores like a hard inquiry would.
- If you pre-qualify, the lender gives you information about the type of loan you will likely qualify for. This may include details such as the interest rate, monthly payment, and other terms. This is all estimated, though, so it may change if you actually go through with the loan application. Pre-qualifications are also very fast. Some online pre-qualification may take minutes if you pre-qualify for a loan and you like the terms.
- The next step would be to formally apply for the loan with a lender. This includes giving them additional information and performing a hard inquiry on your credit report. Keep in mind that, even if you pre-qualify, you may still get denied. If this happens, the lender will typically send you an adverse action notice, which explains why you were denied.
As with any loan, it is important to take steps towards repairing your credit as soon as possible. This includes paying bills on time, avoiding new credit, and paying down debt as quickly as possible.
Your payment history and how you handle debt have a huge role in your likelihood of being approved or even pre-qualifying for a loan. Taking steps to improve your credit, however, is always a good thing. Even if you have poor credit, there is always time to turn things around. If you take action today, now go get that money.