Many people resort to investment because they began to realize that living with a paycheck was not enough for them. The problem with this decision is that you will need money in the beginning, which is not always easy. Your best choice is usually to get a loan, but this option has some complications. Whether you're looking to get a loan to start a business or to pay off your mortgage, the history of bad credit will always stop you. The question is, can you still get a loan in this case?
It's possible, yes, but it's certainly not easy. Having a bad credit history does not mean that you are a bad person. It is a financial strait in which many people find each other and it is a hell of a difficult time to go out. You need a loan to get out of this closed loop, and there are sources from where you can get one even if you have poor credit history.
Yes, your first approach to getting a loan with your bad story goes to your friends and family. It does not always work, but in this case, you should definitely enjoy it, because your friends and family may not charge you high interest rates, if they already did. You need to put in place a solid payment plan that guarantees them to get their money back in a time frame that you will agree on. It is very important to make them believe that you will repay all the money in a given period, so that they feel comfortable to lend you the money you need to get out of your financial difficulties.
Now that the simplest option is no longer feasible, is it possible to obtain a bank loan or a lender with your bad history? It's not easy, but it's possible. However, you will have to do certain things in order to qualify for a loan. Here are some tips and things you need to keep in mind as they could get you the loan you desperately need.
1. Familiarize yourself with your finances
You probably can not hope to get a loan if you do not know the ins and outs of your personal finances, down to the smallest detail. Familiarize yourself with your accounts, their content and the evolution of cash flow in recent years. You can start by checking your credit reports, which is a crucial first step, as this is how you start calculating your credit score. If there are any particular comments in your report, you should try to contact those who have made this remark so that they delete it before applying for a loan – because it makes a difference and such comments will be taken into account by the lender.
It is also very important that you know your credit ratings and your debt to income ratio, because this is how you can start developing a plan to improve your score history and allow you to raise.
2. How to improve your credit history
Now that you're familiar with your credit report, it's time to start implementing some strategies to improve it. The first thing you need to pay attention to is the payment history. Yes, many factors are taken into account in your overall score, but the payment history is the most crucial and the most delicate. So you have to make sure you pay the upcoming payments on time. Forget what has happened in the past and focus on upcoming events so you do not miss any events.
Contrary to popular belief, closing old accounts is not always a good practice. Why? Because these old accounts that you have already paid are likely to increase your credit history, they could give you a much stronger foundation to argue your application for the new loan.
You must pay attention to your credit limit. It is always best that you maintain a reasonable ratio between your debt and your credit limit. The lower this ratio is, the better it is, of course. This is important because it is very bad sign if this percentage is high and it would show to many lenders that you are not very wise about your finances and that it could dissuade them from granting you a loan.
About credit, you should never open new accounts on credit unless you are 100% certain that you can take care of them and pay them on time. Opening credit accounts randomly and excessively shows lenders that you are not very responsible, or worse, it may make them think that you are using a scam. That's why it's very important to limit the number of your accounts and open new accounts in case of an emergency, and if you are absolutely certain that you can manage them.
3. Understand Your Options
After doing your best to improve your credit score, you then want to search for a lender tailored to your needs. But you still have one thing to do before you take this step: understand your credit options. The two most common types are unsecured and guaranteed loans.
Unsecured loans can be a little problematic if you have a bad history because they charge you a higher interest rate because of your situation – and that is if you manage to get the ready in the first place. An unsecured loan is basically a loan for which you do not need collateral. You can use them to cover emergencies or other debt in which you found yourself.
Guaranteed loans, on the other hand, are covered by a guarantee such as home equity or any other asset. The good thing about this is the fact that they have lower interest rates, but you must first have a guarantee to get a secured loan.
4. Find a co-signer
It's one of the best strategies to help you get a loan. A co-signer is a person with a healthy credit rating who would sign the loan with you, which will increase your chances of getting it exponentially, not to mention the fact that he will probably earn you a lower interest rate. . Your chances are always better with a co-signer, and if you have someone who is willing to help you, you should convince him to do it because it will make a big difference.
5. Find the right lender
Now that everything is in order, you have to start looking for the right lender. This step will require a lot of research on your part and it is important that you be diligent with it as it makes all the difference in the way this whole process will unfold. Do not settle for the first loan that approves you; wait to look at other options to have a clear picture.
You want to find a lender who would give you the personal loan you need to get the lowest possible interest rate and the best loan term. Each will have their own policies and assessment process to determine the risk of lending money, because loans for people with bad credit are associated with a risk factor for most lenders and they do not distribute them like that. You have to keep in mind all these points because you might need this money urgently, for example. So, do your homework and research all the lenders you can find online, and you'll find a lot of them.
There are other options that you can resort to if you want to get a loan with your bad history, but they can sometimes come with higher interest rates. For example, in securities lending, lenders rarely worry about your bad credit and you can easily use your vehicle as collateral to get money, but this is a short term loan and the rates interest are usually a little higher. So, keep this in mind if you are considering getting a title loan. Credit unions are another attractive option for credit unions, which specialize in providing loans to people with poor credit histories. You can easily find local options to help you get out of your traffic jam. The great thing about credit unions is the fact that they have an interest ceiling that applies to everyone – 18%. This is an excellent percentage and it's about half of what a bank would offer you with a similar loan with your bad reputation.
There are other options that you can use if you want to get a loan with your bad history, but they can sometimes be matched with higher interest rates. ]
1. Higher rate of interest
You can get a loan even with your bad past, but you will have to pay higher interest rates than usual because of your particular situation. Banks and lenders usually take advantage of your money – and, to be honest, they try to be cautious, given your bad reputation and the fact that you're at risk – – so they impose higher interest rates. which means you will pay a lot of money in the long run. Keep this in mind before applying for a loan with a bad story so you will not be surprised when it is approved.
2. They take time
Some of these loans with a bad history could take a long time to be processed, a little longer than your average loan. Sometimes it's because they check your history and check your finances or other details, but this may not be the best option for you in an emergency.
You must be sure to read every detail of your contract with the lender, as sometimes additional fees or penalties may be imposed on you without even knowing it. Ask if there are loan origination fees or other hidden fees, and whether or not they have late penalties, and what is the amount of these penalties. There are even lenders who impose a penalty if your payments are made by check! It is therefore important to check this information carefully because the last thing you want in your situation is to pay any extra money that you can not afford to save.
4. The risk incurred
You may be asked to include a warranty in the contract, such as your car or your home, which is a little risky, because if you do not pay your installments, you risk losing the car or the house.
5. Many shady lenders
You may meet a lot of shady lenders here and there, which you have to be very careful about. Some do not have a license and do not have permission to offer this type of service, so be sure to deal with an approved lender in your state before paying money to avoid being scammed.
6. The temptation of short-term borrowing
Most short-term loans with your bad story can sometimes be too hard to resist. Title loans, pay days and all tastes can seem very tempting, but they come with a lot of luggage. Their interest rates are higher and they cost you more money in the long run, so this is something to keep in mind.
As this article shows, it is possible to obtain a loan with a bad history. Is it perfect? Certainly not, but your situation either. You will have to compromise in both directions to get out of the mess in which you are, but remember to be patient and wait for several other offers to be able to compare them and choose the one that suits you best.