A tarnished credit score is not the end of the world – A sneak peek into bad credit lending

By on August 27, 2013

Bad credit is a big problem Americans are facing nowadays and this is probably the biggest reason that is barring them from receiving new lines of credit at a reasonable rate. When you have filed for bankruptcy or you have been marked for non-payment on any debt for more than 60 days, chances are high that your loan application efforts will all be denied and rejected by lenders.

Your credit score is the most important number that is checked by a lender before transacting with you. This 3-digit number gives them an idea of how you’ve managed your debts and personal finances in the past. If you don a good credit score, you will naturally be preferred by lenders as your future financial behavior will be taken for granted. However, does that mean that you won’t be able to get any loans if you don’t have a good score? No, this is not so. Yes, you might face difficulties or even road blocks while getting a loan approved, but don’t think it’s impossible. Read on to the concerns of this article to know the options when you are a victim of a tarnished credit score.

Bad credit lending options – Don’t feel left-out in the crowd

All those who don’t have a good credit score usually feel left-out and abandoned in the crowd of people having a perfect and stellar credit rating. You are by no means out of options when you have a bad credit score.  The options mentioned below can be beneficial when you immediately need a loan to meet your short term or long term expenses. Before deciding which route to go, you might consider the following.

  • Credit unions: As opposed to a bank, the credit unions are owned by its members and are regulated and directed by its board of directors. While the banks focus on your credit profile, the credit unions tend to look at you more like an individual. So, when you have a poor score, you may look for loans from credit unions. Apart from getting help from credit unions, you may also get help from expert debt counselors who can study your finances and assist you in getting out of debt and also improving your credit score.
  • Grab a co-signer: Do you know someone who is close to you and has a stellar credit rating? If you answered yes, there you go! You may be able to grab a loan even with a poor credit score by letting them co-sign the loan on your behalf.  He/she will become partly accountable for repaying the loan.  If you start defaulting on the loan, the co-signer becomes responsible for repaying it.  If you don’t want help from a stranger, stick to asking your close friends and family members.
  • Peer to peer lending: Instead of borrowing money from a bank, you can borrow from an individual who won’t throw tantrums when looking at your credit score. If they are an individual and not a commercial bank, there’s a better chance they’ll listen to your story.  There are different peer-to-peer lending websites from which you may get in contact with such people.
  • Use a collateral: If you have some valuable personal property, you can borrow against that amount. It’s like insurance on your loan that facilitates the chance of getting one.  However, you need to be careful.  If you default on the loan, you might risk losing your property that you’ve pledged as collateral.

By leveraging any of the above options, you may be able to secure a loan.  However, it’s important to note that the terms and conditions of the loan could be less than the ideal. You might face a higher interest rate, but you can still improve this by slowly starting to pay off your debts.  Always shop around and get multiple quotes before committing to any one option.

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