When I was looking to get a new car, I wasn’t sure it would be possible because of my poor credit standing. I figured I would have to have stellar credit in order to qualify. Not totally true. Good credit, of course is ideal, but you can also end up in a very nice car even with blemished credit. There are many programs and dealerships like EARNHARDT AUTO CENTRES’ finance department willing to help. Potential car owners who visit Mr Ed Finance Department can not only help you get into a new car, but they can also help you work on improving your credit standing.
It is true that getting a loan with a bad credit standing sounds and seems almost impossible. But trust me, I have been there, so I know better. Difficult and/or unforeseen circumstances in life can force you into borrowing money; and with a bad credit standing can greatly reduce your chances of being granted a loan especially by main-stream financial institutions such as banks, because they fear the possibility of default. But there are options for you.
Getting a Loan with a Poor Credit Standing
- Borrowing from Family and/or Friends
I know! Most people do not want to share their personal problems with their friends and family not only because it is demeaning but also because they do not want to be pitied or laughed at. But if you find yourself in financial difficulty and need a loan, there’s no better place to borrow than from a family member or friend who is willing to loan you some money. After all, what’s the worst thing that could happen?
Be honest and open about your current situation with that person, set and agree on terms pertaining to repayment and interest if applicable. Put your agreement in writing via a promissory note (notarized if requested). But most importantly, treat the loan as you would a regular bank loan and keep to the terms of the loan. There’s nothing worse than broken trust.
Credit Unions or Micro-Finance Institutions
While most people consider banks to be for those with good credit standing, credit unions and MFIs were actually for people like you and me – those with bad credit standing. Credit unions and MFIs are small, financial institutions owned and managed by members. Generally, their business model permits them to use more than your credit score to evaluate your loan application.
To be eligible for a loan, however, you must be a member so, open an account, show some identification, put some cash in your account and apply for a loan. Your interest will be based on how bad your credit standing is and the offer the credit union or MFI makes you. However, the most important thing is to pay back the loan as you don’t want to add to an already poor credit rating.
Getting a Secured Loan
Alternatively, you can use a secured loan option. Here, some property owned by you is mortgaged as collateral. This means that in case you default on the loan, the asset you used as collateral will be foreclosed or seized by the creditor. An example is the Home equity loan which is a loan taken off your house’s value. Another example of secured loans is the Auto loan which is a loan on your car. Generally, the interest rates are a lot higher than for home equity loan. Most dealers require that you pay a down payment and give your car and key documents until the loan is paid in full. Consider using this option because it is among the safest and least expensive options for someone with bad credit standing – their rates are generally low because they are backed by the value of the collateral.
Please, do not default on these loans as it could cost you your collateral, be it your house or your car.
Before you consider these options, consider your present level of difficulty and judge whether you can pay your loan back in the future. I would recommend that you try not to add more debt to your already existing debt, especially if you have no means of repayment.