4 Great Loan Options When You Have Little To No Credit
Posted on: 10 July 2018
When you have bad credit, it's difficult to get a credit card, loans, etc. because you haven't proven you will be willing and able to repay your loans. Unfortunately, if you have little or no credit history, you can also have a difficult time finding a loan. Even though you haven't made any financial mistakes yet, you don't have the credit history to prove you'll repay the money. If you haven't been able to get a traditional loan because of your credit, check out these three great loan options when your credit history is limited or poor.
Home Equity Loan
If you own your own home but have bad credit, it may not matter. Even if you've let your credit decline after buying your home, you may be able to use a home equity loan. For the most part, if you have equity in your home, you can take out a home equity loan, regardless of how bad your credit is. This is because the home is collateral for the loan. If you don't repay the loan, the bank can recoup their money by taking your home or putting a lien on your home. When you ultimately sell the house, the lien will get paid.
If you choose a home equity loan, you typically have two options. You can have a personal loan/line of credit separate from your home loan. This means you'll have two bills: one for the mortgage and one to repay the loan. You can also have the money added to how much you owe. In this case, you would only have to pay the mortgage, but the mortgage would go up to include the amount you borrowed.
Peer-to-Peer Lenders
One common option for people with little or bad credit is borrowing from a friend or family member. Your family or friend is likely not going to reject you based on your credit. However, borrowing from friends and family can cause strain on therelationship, especially if you are unable to repay the loan as quickly as you hoped.
Peer-to-peer lending is an alternative option. With this type of lending, you are borrowing from another individual (not a bank or lender). These types of loans are usually handled on special websites where borrowers can list their need. Investors then choose borrowers to whom they want to lend money. You get the money you need, and they get some interest. These lenders will usually want to see your credit history, but they are more forgiving than banks.
Credit Unions and Specialty Lenders
Credit unions are not banks, but they work basically exactly like a bank, offering personal loans, car loans, home loans, lines of credit, bank accounts, savings accounts, etc. However, credit unions are typically owned by the employees and the people who use the credit union. Therefore, they are often willing to give loans to people with little or bad credit. You will likely still have a high interest rate, however.
Another option is specialty lenders. There are actually some lenders who focus on lending money to people with little credit or bad credit. As with a credit union, you'll still likely have a high interest rate, but as your credit improves, you may be able to have the interest rate lowered, or use it to build good credit before taking out a better loan with a lower interest rate.
If you want a loan, but your limited credit history is getting in the way, one of these four options can help. They provide assistance to people who don't have good credit or much credit history. For more information regarding loan options for people with little to no credit, contact a company like American Cash Advance and Title Loan.
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