Poor credit makes an individual a high risk for most lending institutions including major banks. They have strict standards for calculating the terms of loans and credit scores are an important factor. These lenders have tightened their regulations due to the Great Recession and this makes it harder for the borrowers.
Credit Unions
Credit Unions are nonprofit and owned by their members. When a credit union has an affiliation with an individuals employer they may look past poor credit. The majority of credit unions are currently actively seeking borrowers. It is important to find a commonality with the credit union such as a teacher, veteran or member of the armed forces applying to a credit union created for that profession.
Family and Friends
Sometimes the best alternative is to borrow the necessary funds from a friend or family member. This loan should be legally recorded with clear documentation. To avoid any issues in the future a contract can be created containing the amount, interest rate, terms and course of action if the loan is not repaid.
The Co-Signer
A friend or family member can co-sign a loan from a traditional lender provided their credit is good. The loan can be issued using the credit score of the co-signer. If the payments are made on time the individual’s credit score will begin to improve. If the payments are late or missed entirely the co-signers credit may be seriously damaged.
The Home Equity
A home equity line of credit or loan is an option if there is equity in the home. The difference between the value of the home and the mortgage is the home equity. Since the home is the collateral for the loan the credit score is irrelevant. The interest is generally tax deductible. This enables the individual to access funds until the credit limit of the loan is reached, The debt must be repaid or the home will be in jeopardy. Many of these loans offer a fifteen or thirty-year repayment plan. For additional ways to secure a loan please visit Hard Money Loans.
Peer to Peer Lending
Peer to peer lending is commonly referred to as person to person lending. This type of loan originated in 2005. An individual can borrow funds from another person online as opposed to applying for a loan from an institution. Loan listings can be found on numerous peer to peer websites. The listings are reviewed by investors who choose which loans they want to fulfill. The credit score still makes a difference but these loans are easier to acquire for individuals with poor credit.
Online Personal Loans
Due to technology personal loans, lenders have a new option designed for individuals with poor credit. These lenders offer loans for numerous reasons including home repairs and debt and credit card consolidation. Their decisions are often made within minutes and funds can sometimes be deposited in a matter of hours. These loans often have no pre-payment penalty or application fee. The applications are simple to fill out. The decision is not made based entirely on the credit score. Some lenders have a personal model to score credit. The employment history and any college degrees are also taken into consideration. For excellent assistance in securing a loan please visit bad credit loans.
Secured Loans
A secured loan is when an individual borrows money against an asset such as a car, home, savings, boat or stocks. The asset will be held by the lender as collateral to protect themselves if the individual defaults on the loan. This type of loan offers better terms, lower interest rates and access to more funds than an unsecured loan. If the loan is paid off on time there is a good chance it will improve the credit score of the individual. The equity in the asset being used for collateral determines the amount the individual is qualified to borrow. The best piece of collateral for this type of loan is a home. It is important to realize if the individual defaults on the loan they may lose their home.
Savings Accounts and Stocks
Secured loans are made by some banks using the value of stocks or the funds in a savings account. When these assets are used to secure a loan they cannot be liquidated until the loan has been paid in full. Most experts recommend liquidating these assets to pay off the debt instead of using them for collateral on a loan.