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How to Source $5,000 Loans When You Have a Low Credit Score

Searching for $5,000 loans when your credit is less than perfect can seem like quite the challenge, especially when you consider the fact that there are millions of other potential borrowers who would probably be more appealing candidates to lenders.

You may be thinking – why would any financial institution or private lender make the decision to lend money to someone who presents a high risk of default? While most lenders would prefer to approve borrowers with ideal credit, there’s a huge sub-prime and poor credit market that also needs to be catered to. With that said, there are still many lenders that will consider lending amounts as high as $5,000 or more as long as other conditions can be met.

Of course, your chances of approval will vary depending on the type of loan you apply for, and only certain kinds of financial products are available to people with low credit scores. Still, if you’re willing to put in the research and be persistent, you could achieve your goal of borrowing five grand before the week is over with. In this guide, we’ll go over everything you need to know in order to source the most applicable larger personal loans and guarantor loans for bad credit with the highest rates of approval for applicants with poor credit.

Payday Loans are Good for People with a Reliable Source of Income

If you know for sure that your credit score is below the point where most lenders will look the other way, you may need to resort to alternative borrowing options like little loans. There are a few different avenues you can take to borrow this amount with poor credit, but the one that offers the path of least resistance if most definitely the payday loan market.

As the name implies, a payday loan is a short-term loan that you’ll be paying back gradually on each of your coming paydays. While good credit is not a requirement, you will need to meet a couple of prerequisites. Namely, you’ll need to be over the age of 18 and have an active checking account. It goes without saying that you should also have some source of consistent income coming in so that you’ll be able to make your payments on time.

Ultimately, if you can show solid proof of income that you’ve been receiving for a period of more than 3-6 months consecutively, and you can provide the direct deposit details for your checking account, you should have no problem finding a payday lender that will take your application seriously. Keep in mind that those expectations may vary from lender to lender, and you’ll typically face heightened scrutiny if you’re self-employed.

In fact, some payday lenders require a full year of bank statements proving consistent income from self-employed individuals, so be prepared to furnish such documentation if you are an entrepreneur in a bind. If you do run a small business or work from home, you might be able to find a few other business-oriented loan types and funding sources that could prove to be of help during a time of need.

Come Up with a Business Plan

If you don’t currently have a great job that will gain you approval for a payday loan, you may need to come up with a more creative way to source the loan. Having an excellent business plan is a great start because you give investors a reason to take notice of you. If you were to go down this route, it would be best to at least have proof of concept that shows your idea has been validated and is starting to take off.

In a way, this method of borrowing involves much more than just submitting an application because you need to be prepared to follow through on your business goals once the investors have given you the money. If your company has been in good standing for a while and has its own credit profile, you may have more like applying for financing in the corporate context versus submitting personal loan applications.

Peer to Peer Lending

Peer to peer lending networks have become popular in recent years because they give anyone the ability to lend money to anyone. That doesn’t mean that you can find a P2P lender to lend out money to just anyone, as many will still have their own minimum standards and scores that you’ll need to live up to. However, it’s safe to say that many private P2P lenders aren’t nearly as stringent as the banks, and many of them are looking for ways to put in some philanthropic work.

Thus, many times, the likelihood of being approved on a P2P lending network comes down to your pitch and the reason why you need the money. Keep in mind that the lenders on these networks will still want to see that you have a way to pay them back, so don’t waste your time if you have no prospect of ever making your repayments on time. Over-committing to a large loan amount when you’re incapable of paying it back will only result in additional damage to your credit score and a perpetual process of prolonged poverty.

Finding a Co-Applicant

Having a co-applicant or co-signer on your side can definitely help you see higher odds of approval for $5,000 loans, as the lender will factor their credit score into the equation to take some of the burden of approval off you. This is often a secondary or last resort attempt because it can be difficult to find someone who is willing to put their credit score on the line for you.

After all, if you default on the loan then your co-applicant would also be responsible for making sure the repayments are made. With that in mind, it’s best to limit your search for a co-signor to your close friends or family members because asking anyone outside of your inner circle is unlikely to yield satisfactory results.

Applying for Poor Credit Personal Loans

Poor credit personal loans can come with high interest rates and you may still need to meet a minimum credit score requirement, but they could be worth a try if you’ve already exhausted your other options. Generally, this kind of loan is best for someone who has a credit score in the upper 500s or lower 600s, as applicants in the lower 500s or 400s are unlikely to gain approval for any personal loan above $1,000.

It’s also important to note that many personal lenders will run hard inquiries on your credit report, which will bring down your score. Thus, it’s usually better to stick to payday loans and business-oriented funding if you have poor credit.

Exercise Caution When Submitting Multiple Loan Applications

Be aware that many lenders will place a hard check on your credit report during the application process. Thus, it’s imperative that you inquire about this before you apply, as having just a couple of consecutive hard checks on your report could hurt your credit score even more.

While applying for as many loans as possible seems like a good idea to boost your odds of finding the right lender, it’s not a worthwhile game to play if you’re going to be falling further down the rabbit hole of poor credit and the financial woes that come with it.

Ideally, you should start by submitting applications with a few lenders that don’t run hard checks on your credit record. However, at denominations of $5,000 and above, it’s likely that the majority of lenders would run a hard check on your credit report. Payday lenders are a well-known exception to this rule because they often will not run a hard check since most of their decision is based on other factors like proof of income.

Consider Applying for Many Smaller Loans Instead

Applying for a single $5000 loan might seem like the most appealing and convenient route because it involves the least amount of hassle, but it also presents a significant challenge in terms of the approval odds you’re facing. As you get into the smaller loan denominations, lenders become more lenient about the number of requirements they’ll need you to face.

Thus, it sometimes makes sense to take out five different $1,000 loans than to try and be approved for one large loan from a single lender. Some borrowers go this route and then use a debt consolidation loan to centralize their repayment into one obligation later on. If you do decide to take this approach, try not to overdo it because you could wind up in over your head in monthly repayment obligations.

Furthermore, if you opt to participate in the practice known as loan stacking – taking out multiple loans at once when you need to get cash now – you should probably go with payday lenders since they don’t represent as much of a risk to your credit score in the event of default. Plus, many payday lenders only run soft inquiries, so even if you’re not approved it won’t be as bad as being denied for several conventional loans.