A borrower with poor credit score is considered to be a high risk customer that will leave the lender with nothing but air. Major banks follow a set of standards that determine whether a customer is qualified to make a loan through their credit score screening.
If you’re looking for ways on getting financing, Earning Diary has you covered! We’ll be sharing tips ranging from engaging a co-signer, to how you can use your home as an equity.
Even with a poor credit score, here are some tips on how you can still get financing to help you through your financial problems!
Inquire About “Home Equity Line of Credit”
With a home equity line of credit or HELOC, you can get credit that you can spend. It has a low-interest rate, and also tax-deductible.
Be warned, however, that this kind of loan puts your property at risk if you cannot repay your debt. If you’re thinking of getting financing through this method, make sure that you can repay your debt on time. This financing option is inexpensive whether you have a good credit score or not.
Do your homework and research the best institution that can give you the lowest interest rates before you sign the contract to maximize your HELOC.
Get A Peer To Peer Loan
Perhaps the most concise definition of Peer to Peer lending is defined at EarningDiary’s article, “Alternative Investment Opportunities in UK”:
Many websites that put investors together with individuals or business who want to borrow money. The theory is that borrowers can get lower rates than otherwise charged by a bank, while lenders can earn more money on their savings than they could from a cash account.
Peer to peer loans are gaining popularity as it’s a win-win situation for both loanees and lenders. Investors earn with high interest rates, and loanees pay lower interest rates that can even be as low as 6%.
Borrowers aren’t generally screened on their credit score, but they post how much they want to owe and why they need the money. Unlike the stringent banks that impose standards on lending, an individual investor may be more empathic to your situation.
Find And Join A Credit Union
Nonprofit organizations like credit unions are also lenders that mostly belong to an industry or are located in the same geographic locale. Locate a credit union according to your convenience, and talk to them about getting a loan.
Each credit union offer different interest loan rates, so it’s recommended that you weigh your options one after the other.
Look For A Co-Signer
A co-signer can be your family or your friend who has good credit status that will be signing a loan agreement with you. Ideally, a co-signer knows and understands your situation, and he trusts you that you can pay your loan on time.
Your co-signer will be held accountable once you missed your loan payment. Your payment history will also reflect on his, so this can also affect his credit score. Make sure to fulfill your part of the deal and do not miss out on any payments.
Loan From Your Family Or Friends
If you ended up unqualified for a HELOC or online lenders aren’t interested in lending with your situation, it is possible that your family or friends can lend you money. Despite being close to your family and friends, treat your loan as a business transaction.
Complications may arise in the event of the loan duration, so take the initiative to make a contract that will put in black and white everything that you have agreed upon: payment terms, interest rates, collateral if any, and what will happen if you fail to repay your loan. Treating it as a legal contract will bind you into an agreement. This will also discipline you to commit into this transaction and pay for your loan.
There are some instances that money issues can mar relationships, so do this as a last resort if you cannot find a way to get financed.
If you think that none of these tips work for you to get financing, there are institutions willing to offer loans for those with bad credit. In New Zealand, personal loan provider First Choice Finance is known for their quick cash loans online service.
Aside from these institutions, you can also start working on your credit score. This is the best way to deal with your situation as raising your credit score enables you to have a better chance of acquiring a better loan option.