How to Borrow Money with Bad Credit
Before we dwell on how to borrow money with bad credit, we must know what bad credit is. An individual with a credit history indicating that a borrower carries a higher credit risk has a ‘bad credit’. A low credit gain indicates bad credit, while a high credit gain is an indicator of good credit. Creditors who have lent money to an individual with bad credit face a higher risk getting that money back or defaulting. An individual's credit history depends upon a number of factors, including the amount of money borrowed, the amount of credit availableand the timelines of installments. An individual may have bad credit if he or she does not make timely payments or has defaulted on a loan during a period of time. Having bad credit makes it more hard or pricey to gain loans.
If you were a bad creditor in the past and need to borrow money now, your options may be very limited. If you have bad credit, it will most likely mean that where ever you apply for loans, they will provide you with very high interest rate. If your credit is extremely bad, you may not qualify for a traditional bank loan at all. If you are not eligible to get traditional bank loans, there are still several choices which may be open to you, though some of these will require you to put up your personal assets as collateral.
The first option that can be considered in the case of bad credit is to borrow money from friends and family.If you have a friend or family member who is willing to give you some money as a loan, this can be your best option, as someone you know closelywill possibly give you loan money on easy terms and conditions and at a better rate.Make an agreement with your friend or family member about how much they can give you and their expectations about repayment and installments including any possible interest.If you are borrowing a greater amount of money than any of your friends or family possesses on hand you may ask them to considercosigning on a bank loan. If the person you have asked to cosign the loan has better credit than you do, you may be able to get a much better rate if they also sign the loan.
The second option that you may consider is finding a local credit union. Credit unions are smalllocal financial institutions that are owned by individual members rather than shareholders. Because of this business model, these credit unions have lower fees and a distinct customer service model that assesses loan applications based on more than merely a credit score. If your credit is poor, the rate will still be high, but not as high as it’s possibly be at a large bank.
Getting in a direct contact with an individual loan provider through different companies is another considerable way to get loans if you have a bad credit. These agreements can turn out to be afavorablesituation because the borrower gets a better rate and is more likely to get a loan despite having a bad credit.On the other hand, the creditor gets a better rate of return on his money than a bank normally provides. You have to create an account, request a loan through that account and once you get an offer you have to negotiate the terms to get the loan.
Another way to get a loan is secured loan. In this a property you own is used as collateral. Rates for these loans are low, because the value of the loan is secured by property. Your banker may guide you about how to apply for one of these loans. Be careful! If you fail to make your payments, you could lose your property.
Getting a refund application loan is the last way to get a loan if all else fails. Refund anticipation loans utilize your anticipated tax return as collateral, normally with an interest rate of 10 percent or more. RALs are available from the start of January at the end of the fiscal year, up until April when taxes are due.