Loans 101 – Bad Credit

February 14, 2015 by  
Filed under Loan Funding, Quick Loans

A bad credit history or no history at all, can cause major concerns and uncertainty, when it comes to applying for a loan. The truth is no one will be willing to give their money to people who have a record of not being able to make payments on time, or people with no records at all. A fact is a fact: Until and unless your credit score goes up, getting a loan seems next to impossible. However, there are some alternatives, which those with a poor credit score can definitely consider.

Alternative #1- Using Home Equity Credit
At times, home owners end up paying more than the overall value of their home. However, home owners with equity can actually get a low-interest tax deductible credit line to spend at their disposal.
However, this factor depends on if you are willing to risk your property through home equity, as not being able to repay the debt will be quite concerning. That being said, having a reliable source of income and timely repayments can make this a good alternative to getting a loan with a bad credit score.

Alternative #2- Credit Unions
For those who are unfamiliar, credit unions are like banks owned by their members who usually work in a similar industry or the same line of work, or live within the same area. Basically, credit unions are like nonprofit organizations which work with low fees and provide more customer services. They help those who require a personal loan or any other related service at a low interest rate.

Alternative #3- Peer to Peer Loan(s)
Peer-to-peer or P2P has been one of the most preferred alternatives since 2005. This is an online platform, which allows you to get a loan online from an individual instead of an institution. This method is popular as it has a low interest rate tied to it, as well as ideal for those investors willing to earn high interest rates. You can easily borrow loans at a rate of 6.5% that yield a return of 10.5%, which is indeed a very impressive rate.

The procedure is very simple as well: the borrowers have to leave a simple post defining the amount they require, the reasons for the loan, and an estimated time frame. The investors go through the post, and respond if they find the candidate eligible. However, as investors do check credit scores, there is a chance that you may or may not get the loan.

Alternative #4- Loans from Friends & Family
Why not approach your peers and family for some financial help? Think about it, chances are that they will not charge you interest at all, and will give you a flexible time frame as well. This will leverage you from both sides, provided that you are able to guarantee the repayment. Make sure to document the transaction in the form of a legal agreement. The agreement can prove to be very useful for future references, and can help avoid any misunderstandings and complications. Since everything will be clearly written and mentioned in the document, you will be well aware of what will happen if you fail to repay the loan.