Tag Archives: rates
Getting A Loan With A Bad Credit Rating
The good news for consumers with bad credit is that in today’s marketplace, there are more options for obtaining credit. While borrowers with excellent credit certainly have greater opportunity and access to higher loan amounts, favorable terms, and better rates for loans, borrowers with bad credit now have some hope to borrow money for specific needs.
Many lenders are putting together unique and specific loan products tailored to borrowers with bad credit. Typically, to get the best loan amount, terms and rates available, borrowers that have a bad credit history must secure loans. This means that they must put up their home, auto, or other valuable asset as collateral to reduce the risk to the lender of funding the loan. Homeowner loans are usually the most beneficial to bad credit borrowers if they have some equity in their homes and a valued property.
Obviously, it is much better to maintain good credit, but for many borrowers it is too late. Some lenders offer certain programs that are put together to give borrowers a chance to rebuild their credit while at the same time, gaining access to modest loan amounts. This helps the consumer borrow for specific needs and rebuild their credit for larger or more pressing future financing requirements.
With revolving debt and credit card balances on the rise, more and more consumers are finding themselves in situations with overwhelming and unmanageable debt. Some lenders also offer certain types of debt consolidation loans that allow borrowers to move balances from higher rate loans and cards to lower interest rate products. This is where second charges or homeowner secured loans are often used by borrowers with bad credit to obtain better rates than are available to them through unsecured loans.
The key for lenders is to effectively balance the risk to reward ratio of lending money. Lenders are obviously in the business of lending money so that is what they ultimately would like to do with any borrower. The borrower needs to offer support to their ability to repay debt or security to help offset the risk the lender perceives from the bad credit rating of the borrower. Consumers do need to be careful about overly aggressive creditors who seek to prey on desperate borrowers. Companies that approach consumers with offers that sound ‘too good to be true’, include up front fees, or hide unfavorable terms in fine print should be cautiously evaluated.
Car Loan After Bankruptcy
A car loan after bankruptcy can be one of two things. It can be a great experience as part of a plan to help you rebuild your credit and get you back to a better financial standing, or it can be a giant problem and a way into more high interest debt. Even if you’re in a situation where you’re desperate for a vehicle, you can still try and make your experience become the first one.
Bankruptcy is supposed to be a new start. Sadly for many people after things are finalized they are left not knowing what to do next, and still in a nasty financial situation.
Before you start looking to get a car loan after bankruptcy I recommend building up your credit a bit if possible. There are two types of credit you’re going to want to have, installment and revolving. Installment payments are for things like loans, where as revolving is for things like credit cards.
Obviously in your situation getting a traditional unsecured credit card can be difficult. You do have the option, however, to get a secured credit card. You can usually find these at your current bank or credit union. You deposit a few hundred dollars into a savings account which will be used as security to secure your credit limit on your new card. After approximately a year you will be able to apply for an unsecured card. Make sure that the company you work with reports to the three major credit bureaus about your on time monthly payments so that you build positive credit history.
It is recommended that you wait six months to get a car loan after bankruptcy, not just to build up your credit a bit, but because most lenders won’t work with you before then, and the ones who will, will offer you an even higher interest rate than you’d be offered if you wait a while.
Even after six months to a year you will still be offered very high rates. This is because you are seen as a risky customer. You can try to offset this risk by offering your home, another vehicle, or high priced collectibles as collateral and you will have an easier time both finding a lender and getting a better interest rate. You can also make things easier by finding a cosigner if collateral isn’t an option for you, but you should be aware that if you fail to make your payments this person will be held responsible.
These high rates are generally considered worth the cost, not just because you need a vehicle, but because by paying these rates now and making your payments on time every month you build up a positive credit history and will be offered better rates in the future and generally have an easier time of things financially.
By being responsible and in control of your finances a car loan after bankruptcy can be part of a plan to get yourself back on track.