Debt is almost a necessary evil of the 21st century. Layoffs increased with the financial crisis, and banks have since tightened their purse strings, according to a 2009 Wall Street Journal article. Getting a loan when you have less than perfect credit isn't the ideal scenario, but sometimes it's necessary.
Get a copy of your credit report and determine just how bad your credit really is before you shop around for a loan. Make sure there aren't any errors that could be pulling your score down. Your credit may not be as bad as you think, which is why you should check it out first so you know what interest rates you could be paying. Many banks and credit unions publish their loan interest rates with corresponding credit ratings online.
Talk to your local credit union for a loan. Because credit unions are member-owned, they can usually offer a better interest rate than a national bank. Make an appointment with your local credit union and see what kind of rate they would be willing to give you, based on your score. Make sure you bring in copies of your credit reports and scores, because if you're not ready to sign on the dotted line and the credit union pulls your credit, it could drop it at least five points, which is something your fair credit can't afford. If you have a down payment, it could help your case and show the loan officer you're serious.
Check into peer-to-peer lending if you can't get a loan at a bank or credit union. This form of lending is quickly growing and could be your best option if your credit union or bank is unwilling to give you a loan or wants to charge you a sky-high interest rate. The way this process works is that the bank or credit union is taken out of the equation entirely. Instead you go through an individual. Make sure you read up on the pitfalls and benefits of this process before you go through with it. There are several peer-to-peer lending websites out there, such as Prosper.com, a sort of e-Bay lending site, and LendingClub.com.
Beware of loan sharks. There are several unsavory organizations that prey on people with fair or bad credit. Payday loans, title loans and tax refund loans all have incredibly high interest rates, yet the companies offering them can make them sound appealing. Before you turn to loans like these, it's best to re-evaluate your situation and ask yourself if you really need that loan, or if it's in your best interest to table your plans six to 12 months until you can boost your credit.
Lisa Carlson works as an associate director of recruitment and graduate programs at a public university, and has experience in management, marketing, personal finance and nonprofit organizations. She is a peer-reviewed author on publications for higher education recruiting and holds a B.S. in marketing and a M.B.A.