How to Get Around with Bad Credit

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bad-credit

Everyone needs to borrow money at one time or another for various reasons. You may need it to buy a new car, pay bills or even home improvements.  The problem is that if you have a bad credit, it may not be easy to get the funds you need because of the higher risk factor.  There are ways around this so you’re not as deep in the hole as you think.

Finding Bad Credit Lenders

This is the best option for those who have a bad credit.  There are lenders who will work with you but find one that clearly states they will work with people who have less than perfect credit scores. Micro-lenders will lend lower amounts to those who fall into this category and many individuals make this option their first choice compared to larger banks and lenders. Another option is credit unions for a bad credit lending solution.

Provide Proof of the Assets and Your Monthly Income

If you’re fortunate enough to have assets, you can use them to borrow money from a lender.  You can use collateral such as your retirement fund, the equity in your home, your car and other assets you have that exceed the value of the loan amount you need.  This is called a secured loan and it acts as a cushion for the lender. Don’t go for this option unless you know the repayment terms are affordable and you’ll manage paying the loan off within the terms.  If you’re not careful, you may lose your assets that are pledged. Also, keep your pay stubs handy and previous year’s tax returns if you’re borrowing for a mortgage.  You’ll need this paperwork.

Cosigners can Help

If you know someone who has a better credit score than you that can cosign, you may have a higher chance of getting the money you need.  This should never be your first choice since just like collateral, there is a risk involved.  Keep this at the bottom of the list when all else fails.

Government Loans and Grants

There are program on both state and federal levels that have been setup for different purposes.  There are programs that you can get loans for buying a home such as through the FHA and HUD.  The loans can also be obtained for home improvements such as solarizing and there are many states and counties that have their own lending programs for this purpose. There are various types for bad credit people as well.

Just because you have bad credit doesn’t mean the windows and doors are closed.  Though it may take longer, you still have options to get the funds you need. You may have to shop around but eventually you’ll find something that works well for you as well as the lender. Don’t forget you need to get information on the lender and most importantly, learn about other people’s experiences with the entity in question.  This way you don’t have any surprises later on down the road.

What You Shouldn’t do When it Comes to Loans

The worst thing you can do is the grab the first loan you find that is approved.  This means you didn’t do your homework and could possibly get yourself into trouble later not having a good background of the deal you just signed.  You must take a look at the interest rate because the rates are higher.  Read what the terms are and try to negotiate some terms if you need to.  Find out what you can do to bring the interest rate down and also see if it falls into your budget in a way that the payments will not put any more stress on you financially.

Go from Place to Place

In a situation like this, you can’t be lazy.  You have to “move” from place to place when you need to borrow money with poor credit.  Even though this will take time and a lot of effort, eventually you will find a loan that works for both you and the lender. No, approval is not guaranteed but what counts is that you don’t settle for the first one that crosses your path. Find something that can lower your monthly rate.

Do you Really Need to Borrow?

Weigh things down before you start the loan process.  Some things are worthy of borrowing for and some things are not. If you have to decrease the amount, you’ll be able to increase your chances of getting a loan.  The reason for the loan will play a big part in your decision.  Are you borrowing money to go to college or to send your child to college?  This is good reason to borrow.  Do you want an expensive car just to be the center of attention? Sorry, that’s just not a good reason to incur debt.

Do you know Your Credit Score and Where You Stand?

If you don’t know what your score is and where you stand, there’s a good chance that some unscrupulous lenders will take advantage of this.  Sometimes, your credit may not be as bad as you think and you may be roped in for an expensive and high interest rate loan when you could have found a lower interest loan because your credit score wasn’t as low as you believed.  Get a copy of your credit report, prepare to answer questions on delinquencies and be ready for your interview. You’ll probably find believable answers to questions before they’re even asked. Having an explanation may increase the lender’s comfort level with approving your loan. Things happen sometimes that are out of the loan applicant’s control so the lender may see a different side of things.

Making a Budget

If you’re not sure you can afford the loan, do a quick calculation of all of the obligations you have like your utility bills, other credit card debt, other loans and personal living expenses.  Then compare it to your monthly income.  Ensure you earn enough to cover all of the expenses.

As you can see, there are many ways to get a loan and also many things to consider.  Time and effort can make a huge difference when it comes to getting the funds you need.  Not being able to borrow with bad credit is a myth if you can do something to change this.

 

 

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