You may have seen on a sign somewhere or maybe on TV or your computer screen: "No credit, no problem!" Do not believe it. The truth is, when you need to get a loan and you have no credit or bad credit, there must be a problem. This is not an insurmountable, but it is a problem, fixed.
Having a bad credit make your customers at high risk for major banks, credit unions and other major lending institutions. Those lenders have strict standards, and they depend on the borrower's credit score when selecting them and calculate loan terms. Unless lenders believe that the loan will be repaid, they will not make loans. In addition, high regulation and tighter internal controls by the lender in the wake of the Great Recession current lending climate makes difficult for the borrower.
So, when your credit is bad, you might feel like you're at the mercy of payday lenders and sources of financial aid, a source that will only lend you money if you agree to pay it back at a high, or "subprime," interest rates. These loans gold stupid. They often do you leave more in debt than you have to. In fact, payday loans are illegal in 13 states because of their predatory terms.
However, when you have bad credit, there are still ways to get a loan while staying away from high-interest lenders. Your choices include visiting a credit union, borrowing from friends or family, looking for a co-signer, tapping home equity loan and the pursuit of peer-to-peer.
Visit Credit Union
Credit unions are similar to banks in terms of their services, but they are owned by their members rather than by shareholders who seek profit. Because they are non-profit institutions, credit unions pass their income together for their members in the form of lower costs and borrowing costs and better customer service.
A credit union - especially those affiliated with the employer or community-based one - might be willing to look beyond bad credit history and make a decision about whether to lend money based on your character and promise to pay, regardless of if you have bad credit or no . Think of them in the way you would a small community bank of last year.
Despite the recent recession has forced a number of smaller credit unions across the country to be merged with a larger, almost all credit unions are actively seeking borrowers. If you can afford a term that matches your credit history, you may find the credit union at a place willing to work with you.
If you think to ask for a credit union loan, look for one with which you have something in common. For example, if you are a veteran of the armed forces, you may want to approach the Navy Federal Credit Union. If you are a teacher, there are credit unions are created by and for members of the profession.
Borrow from family or friends
In Shakespeare's "Hamlet," the character of Polonius advises his son Laertes be "not the borrower, or the lender." While this advice is wise when dealing with strangers, it might be wise if you are thinking about borrowing from family members or friends. Do not pay a loan to a friend or close relative can poison the relationship in a way that goes far beyond a bad credit report.
However, sometimes the people closest to you are the best source of funds, and family loans can benefit everyone involved. You should always treat any loan from someone you know is just as important if a business transaction between you and the stranger. That means it should be formalized with clear documentation and recorded legally. To avoid problems in the future, make a written contract that includes the terms of the loan and the interest rate, and what will happen if you can not pay the debt.
Get Co-Signer
If you borrow from friends or relatives is not possible, you can still get close to someone with good credit who believe in your ability to repay the loan, and you can ask him to be a co-signer loans from traditional lenders. With a co-signer to qualify, the lender will set the terms of the loan based on credit score people with good credit, which then will be equally responsible for payment.
All payment information will be stored on both your and your credit report co-signer, so if you default on the loan, or you are late with a payment, you will severely damage your credit score co-signer. However, if you make payments on time, your score alone will increase, making it easier to get a loan in the future without a co-signer.
Tap Your Home Equity
If you have equity in your home, you can apply for a home equity loan or home equity line of credit (HELOC). Home equity is the difference between the amount of your house can be sold and your mortgage. Your home is used as collateral, and home equity loans can be obtained without your credit score. The interest rate is usually lower, because the loan is secured by the home. Also, the interest you pay on a home
equity loan is usually tax-deductible.
Unlike a home equity loan, which is a lump sum of cash, HELOC act like other credit accounts. You can access money when you need to, until the loan credit limit, and you have to pay in accordance with a predetermined schedule. In both cases, it is important to remember that tapping home equity you put your property at risk if you do not pay the debt. But if you are disciplined and have a reliable source of income, it is an inexpensive way to borrow from leading lenders.
Unlike a home equity loan, which is a lump sum of cash, HELOC act like other credit accounts. You can access money when you need to, until the loan credit limit, and you have to pay in accordance with a predetermined schedule. In both cases, it is important to remember that tapping home equity you put your property at risk if you do not pay the debt. But if you are disciplined and have a reliable source of income, it is an inexpensive way to borrow from leading lenders.
Consider Peer-to-Peer Lending
Peer-to-peer lending, also known as the loan-to-person, is a relatively new form of loans, having only been around since 2005. It is an online platform that allows you to borrow directly from other individuals and not from an institution . Potential borrowers can post the list of loans in various websites peer-to-peer, which shows the number and what it wants to. Investors review the list and choose which loans they want to fund.
Your credit score is a factor, but because individual investors have much greater opportunities in the way it has to be weighed, credit standards are significantly less restrictive and interest rates are usually lower than those offered by traditional lenders. In addition, the site peer-to-peer help evaluate the risk of the borrower to the lender, while verifying the credentials of the lender for the sake of the borrower.
Al Krulick