It is often quite difficult to secure a loan when you have bad credit. Bad credit refers to the credit history of an entity, which in the past haven’t paid all its liabilities in time. This means that his credit history will indicate his untimely payments. That is why generally the market forces are not eager to lend them money. But still there are a few ways by which even a person having bad credit can secure loans.
We will discuss the following five avenues:
- Having a Co Signer: One can get loans even with bad credit as long as he can present a person who is ready to sign on the bond guaranteeing that the borrower is genuine. The co signer is also responsible to the lender in case of any defaulting activity by the borrower. Generally, the co signer is a member of the family or close relatives and friends.
- Borrowing in a high interest rate: When a person having bad credit history applies for a loan then the bank charges a rate of interest which is much higher than the prevailing market rate. This gives the bank security against possible nonpayment of loan by the borrower. The loan fees are also comparatively high and the limits are low.
- Credit Unions: Seeking assistance from credit unions is also not a bad idea since they five more emphasis on meeting the person concerned and not going only by his record of bad credit. The unions interview the borrowers and if satisfied they provide credit.
- Job Stability: Job stability is another resource that facilitates loan even with a bad credit in the following ways-
- Having a stable job lessens the chances of default by the borrower.
- The lenders get to know that the borrower has a consistent income.
- The monthly income of the borrower assures the lenders of regular payments of installments.
- Personalized Lending: These are the informal sources of borrowing money. Various sources such as micro investor websites & small scale investors often provide loan to people with bad credit history.