Having a bad credit score is obviously a major stumbling block for most loan applicants. Banks and other lending institutions such as credit unions view you as a high-risk client. Although every lender has their own loan qualification standards, the primary factor for calculating the terms of your loan often depends on your credit history.
Lenders need to be assured that you will be able to repay the loan in due time before they give out their money. With bad credit, your options may only be limited to payday lenders who charge high interest rates that may sink you further into debt. Below are loan alternatives you can pursue when you have bad credit.
1. Find a Guarantor
A guarantor will cooperatively sign the loan application contract with you. You need to approach an individual who still believes in your ability to repay the borrowed money. Most applicants for business loans often approach friends, relatives or their bosses at work who have good credits to cosign their loan.
If the guarantor is qualified, the lender will calculate the loan terms based on his or her credit score. Should you fail to repay the loan, your guarantor assumes full responsibility for repayment. Failure to repay or late payments damage the credit score of your guarantor. However, timely loan repayments improve your credit score, and you can access loans in the future without having to get a cosigner.
2. Secured Loans
You can borrow a loan against assets under your name, usually referred to as collateral. It can be your house, car, stocks or savings. Government loans for people with bad credit are usually calculated based on the value of your collateral. If you need a bigger loan, you should consider offering your home or title deed as collateral. Remember, you risk losing the collateral should you default on repayment. Other lenders prefer to calculate the terms of the secured loans depending on the value of your stocks or savings.
3. Government Business Loans
The British government, for instance, has expanded loan programs aimed at financing small businesses to grow regardless of their bad credit score. For such government loans, the lender assesses the future value of your business and the capacity to repay the loan in future. The government, through its relevant agencies, evaluates the value of the loan based on what you want to spend it on and the market value of the product or service your business offers. To secure a personal loan from the government, you will need to leverage collateral.
4. Get an Unsecured Loan from a Bad Credit Site
Technology has closed the wide gap between lenders and people with bad credit. If your score is poor, look for a Personal Loan Lender from brokers like Bad Credit Site that will give you a loan to consolidate your credit card debt or pay your electricity and water bills. These sites are fast is in processing your application, and within minutes they deposit the money in your account. Besides, they don’t charge an application fee. Online Personal Loan lenders usually design unique credit score models to suit even those with bad credits.