Even if you have a bad credit record because you have previously defaulted on a loan it is still possible to get credit. When you have a poor credit history the usual lenders will refuse you further loans. If you need a loan you have to look at other methods of getting credit.
Firstly, it is important to consider whether you really need to take out a loan. Credit has been pretty cheap in the past. But it is getting increasingly expensive. If you already have debts it is important that you attempt to address this problem first rather than incurring more debt.
You should only take the risk of taking on more debt if it is absolutely vital. Unfortunately, debt is almost essential in the modern world. If you need a home, a car, or medical care it may be unavoidable.
A loan may help you back on the road to financial stability if you plan carefully. It may be possible to pay off previous loans that you took out at higher interest rates if you can get a loan at a better rate. But beware of compounding the situation by taking out another loan at a rate you can’t afford.
It may be possible for you to get a loan if you have a co-signer. Your co-signer must have a sound credit history. They make themselves responsible for the debt. Usually the co-signer is a close friend or relative, perhaps a parent. But remember that if you default on this loan the co-signer must pick up the bill. That may put intolerable strain on the relationship.
So discuss the situation carefully with your co-signer first. Make sure they understand the risk that they are taking on before they sign. Discuss your plans with them. Their input may be helpful in deciding whether the loan is a good idea.
It may be preferable to get a loan directly from the friend or relative. If they have cash to spare they may be willing to help if you explain your circumstances. In a bad economic environment the best defense is solidarity with other members of your social network.
Mutual societies, or credit unions may be able to help with small loans. They are also important in encouraging the saving habit. They are often better than banks for those on low incomes.
If you turn to a commercial lender you will almost certainly have to pay a higher rate of interest if you have a poor credit history. This is not a good option. But it may be the only way. Check carefully that the rate of interest is affordable for you. Be especially careful to make sure that the rate of interest you are offered is not an introductory offer. It may increase sharply after the introductory period.
To sum up: only take out a loan if you really have to and be careful that you can afford the repayments. There is no shame in being poor. With the economy going into recession you won’t be the only one.