Living in the golden age of credit, absolutely no one is ever deprived of funds, regardless of credit scores, income, jobs, or even bankruptcies.
Even if you are cut off from legacy sources of banks and financial institutions, there is a wide range of private sources such as peer-to-peer loans, payday loans, credit cards and cooperatives that offer a second chance at almost everything. the world, with any type of past.
If you’re stuck with bad credit, there are plenty of options to access needed funds, whether for emergencies, investments, or major purchases, without agreeing to predatory terms or interest rates.
In this article, we cover some popular borrowing services and options that not only cater to people with bad credit, but can even help restore and build good credit.
1. Find a co-signer
For people with bad credit, one of the best ways to borrow from old banks and financial institutions, at reasonable interest rates, while rebuilding credit, is to get a co-signer for loans. A co-signer should preferably be a friend or relative with a good financial situation, which means a better credit rating, unencumbered assets and few liabilities.
Of course, this means that the co-signer will also be responsible for repaying the debt, and in the event of default or late payment, even his credit rating may suffer. This is essentially based on trust, and people often have their loans co-signed by their parents, or relatives, who are often reimbursed so as not to jeopardize personal relationships.
2. Credit unions
For those who have fallen through the cracks of traditional finance, credit unions offer a lot of value, especially since their interest rates remain capped at 18%. Although they still have certain requirements for loan approvals, they might be willing to look beyond a low credit score, if you have a stable job, or even depending on your character, your ties to the community and a promise of reimbursement.
There are specific credit unions for different professions and communities, for example, if you’re a veteran, the PenFed Credit Union or the Navy Federal Credit Union can offer quick payouts at lenient rates and terms. Likewise, other public sector employees can get priority through the State Employees Credit Union or the Schoolsfirst Credit Union for teachers.
3. Bad Credit Personal Loans
Although most traditional banks are hesitant to lend to people with bad credit, that doesn’t completely rule out personal loans. Given the intense competition within this industry, banks and financial institutions are more than willing to bend the rules, especially if you can give them a reason to show your creditworthiness, bear the heat of your low credit scores .
There are some lenders who decide mainly on job and income, so as long as you have maintained a steady job for at least a few months, these are some of the best loans almost anyone can get. Interest rates vary between 4% and 36%, depending on risk factors, so these sources should only be used for short-term and emergency requirements.
4. Secured Loans
Even with a bad credit rating, it is quite possible to get loans approved, when secured by assets such as real estate, stocks, savings, cars, etc.
In the event of default, the lender takes possession of the asset, but given the considerably lower risks in this regard, borrowers can obtain better terms and lower interest rates, compared to the other options on this list.
5. Peer-to-peer lending
As the name suggests, P2P lending borrows and lends between individuals, using an online platform, as opposed to institutions.
Even though this concept has been around for centuries, it has started to gain momentum online in recent years and remains a great option for investors to leverage their savings with high interest rates and for borrowers of Quickly access funds, regardless of status. terms.
There are a number of online portals and marketplaces that cater to this concept, the most popular being FundingCircle, Prosper and LendingClub.
These platforms facilitate safe and intuitive peer-to-peer lending, and while they include credit scores in the listings, lenders are free to ignore the same and offer credit based on alternative factors.
Options abound for borrowers, regardless of their bad credit, low income or credit history, and for the discerning borrower, even a low-interest loan is within reach, provided that he strives to show the lender his ability to repay. .
A number of these sources should only be limited to emergencies and short-term financing needs, given their high APRs and ability to trap borrowers in cycles of debt. A few others, like credit union loans or peer-to-peer borrowing, can still be used for large purchases or to start a business, depending on the terms and rates offered.