Getting Loans with very bad credit is not a big deal in today’s world. A person gets a bad credit history when he has failed repayments or bill payments, has missed credit application or when having borrowed in the past the person fails to repay it and the lender is unsure whether to trust the person further.
Obtaining the best loan with bad credit in 2017 means finding a lender who is transparent about rates and fees, flexible on terms, and is willing to view you as more than your credit score. It also means avoiding predatory lenders and common frauds that can keep you trapped in a cycle of debt. We’ve researched companies that are exclusive in lending to customers who may have some blemishes on their credit report. Good loan can be the tool you need to get a hold on your finances, find some breathing room in your budget, and improve your credit. We have done some research to find some great options that can help.
Option #1: Using a Home Equity Line of Credit
If you have sufficient equity in your property, you could get a low-interest, tax-deductible line of credit to spend any way you like.
Of course tapping your home equity puts your property in jeopardy if you cannot repay the debt. But if you have reliable income and are disciplined about paying down an equity line, it’s a reasonable option, regardless of your credit score.
Option #2: Apply to Credit Unions
Credit unions are much the same as banks but are owned by their members, who typically have something in common—like working in the same industry or living in the same geographic area. Credit unions are nonprofit organizations that pass along earnings to members in the pattern of lower fees and higher customer service.
Option #3: Get a Peer to Peer Loan
Peer to peer lending has been around since 2005. It’s an online platform that authorises you to borrow directly from an individual instead of from an institution. This kind of lending is growing in popularity because it’s a streamlined process that’s a win-win for borrowers who pay low interest rates and investors who earn high interest rates. At present you can borrow for as little as 6% and earn an average return in the double digits—that’s pretty impressive.
Borrowers post a loan listing that comprises of the amount they want and why they want it. Investors review loan listings and suede the ones that meet their criteria. Peer to peer lenders screen all applicants and look into your credit, which becomes part of your loan listing. So while your credit score is still a factor, an individual investor may be more considerate to your situation than a traditional bank.
Option #4: Take a Loan from Family or Friends
If an online peer won’t lend to you, then maybe you have family or friends who will. Treat a loan from someone you know just like a serious business transaction that’s purely documented and legally recorded.
To avoid complications later on, a written agreement should be created that includes the interest rate, payment terms, any collateral you put up for the loan, and what happens if you fail to repay the debt. You can also get promissory notes from sites like Rocket Lawyer or Legal Zoom.
If you’re borrowing money to buy a home, the loan must be secured in order to take advantage of the mortgage interest deduction. To accurately register and manage a home loan with a relative, use a service like nationalfamilymortgage.com.
The bottom line is that a family loan must be beneficial for everyone involved and should really be a last resort. You don’t want to jeopardize a close relationship over a bad debt or a misunderstanding about money.
Option #5: Appeal to a Co-Signer
If you don’t have a friend or family member who’s desirous to give you loan, perhaps one with good credit would be willing to co-sign a loan with you. Someone who knows your situation and trusts your capability to repay the debt would probably be willing to take a chance on you.
Remember that if you don’t repay the debt, the creditor will look to your co-signer for full payment. Additionally, all the payment history will be recorded on both your credit reports, which could be disastrous for your co-signer if you don’t hold up your end of the bargain and make late payments or default.
If none of these 5 lending options works for you, do your best to bump up your credit score so you can qualify for a traditional loan.
Whether it’s because of your thin credit profile or a history of missed payments, a bad credit score will affect your interest rate and a bank’s perception of your ability to repay them. Your loan may also be capped at a lesser amount to help the lender lessen its risk, and you may even have to offer more collateral to secure a loan.