Bad Credit History? Essential Tips To Help You Get A Loan!

Even if you have a bad credit record because you have previously defaulted on a loan it is still possible to get credit. When you have a poor credit history the usual lenders will refuse you further loans. If you need a loan you have to look at other methods of getting credit. Firstly, it … Continue reading “Bad Credit History? Essential Tips To Help You Get A Loan!”

Even if you have a bad credit record because you have previously defaulted on a loan it is still possible to get credit. When you have a poor credit history the usual lenders will refuse you further loans. If you need a loan you have to look at other methods of getting credit.

Firstly, it is important to consider whether you really need to take out a loan. Credit has been pretty cheap in the past. But it is getting increasingly expensive. If you already have debts it is important that you attempt to address this problem first rather than incurring more debt.

You should only take the risk of taking on more debt if it is absolutely vital. Unfortunately, debt is almost essential in the modern world. If you need a home, a car, or medical care it may be unavoidable.

A loan may help you back on the road to financial stability if you plan carefully. It may be possible to pay off previous loans that you took out at higher interest rates if you can get a loan at a better rate. But beware of compounding the situation by taking out another loan at a rate you can’t afford.

It may be possible for you to get a loan if you have a co-signer. Your co-signer must have a sound credit history. They make themselves responsible for the debt. Usually the co-signer is a close friend or relative, perhaps a parent. But remember that if you default on this loan the co-signer must pick up the bill. That may put intolerable strain on the relationship.

So discuss the situation carefully with your co-signer first. Make sure they understand the risk that they are taking on before they sign. Discuss your plans with them. Their input may be helpful in deciding whether the loan is a good idea.

It may be preferable to get a loan directly from the friend or relative. If they have cash to spare they may be willing to help if you explain your circumstances. In a bad economic environment the best defense is solidarity with other members of your social network.

Mutual societies, or credit unions may be able to help with small loans. They are also important in encouraging the saving habit. They are often better than banks for those on low incomes.

If you turn to a commercial lender you will almost certainly have to pay a higher rate of interest if you have a poor credit history. This is not a good option. But it may be the only way. Check carefully that the rate of interest is affordable for you. Be especially careful to make sure that the rate of interest you are offered is not an introductory offer. It may increase sharply after the introductory period.

To sum up: only take out a loan if you really have to and be careful that you can afford the repayments. There is no shame in being poor. With the economy going into recession you won’t be the only one.

Home Loans, Credit Reports and Scores

Why do some folks get credit easily from financial institutions for almost anything? Credit limit increases, mortgage credit, car loans or even credit to finance college tuition – these needs are all affordable only if we have learnt that the money is there for the taking. All that needs to be done on our part is to establish a good credit-rating and keep it going that way.

However, if you’ve been a victim of bad debt in recent times and it has depleted your score you still have the opportunity of starting afresh by restoring your credit to a good status. This is particularly important when you’ll be making an important financial decision such as purchasing a home in the next few months.

Even though you might have a steady job and good income which will position you to get the approval of banks to help you with the home purchase, the reality is your credit score has to meet the expectation of your creditor before you’ll be given final approval. Having a good score puts you at a great advantage.

Another thing you should know is that the better your score the lesser interest rate you’ll be required to pay.
Your report and score is a way of proving to your mortgage creditor that you’re not a bad risk, else you might just be avoided and passed on as a landmine waiting to explode if you make mortgage applications with anything less than 700 on your file.

It is, therefore, in your good interest that you should begin steps to sort out this one important area in your financial life. First find out how bad your file is and what information needs to be deleted by getting recent and updated copies of your three files. Once you have that figured out, take immediate steps to restore your creditworthiness by establishing some good activity on your file. Added to this is the importance of using a restoration-kit to repair your file by yourself or consulting a credit repair agent to do the cleaning.

Consolidate Debt Loans – Credit Card Debt Consolidation Loan

The credit card system is the most easily available form of loan, as their authorization is based only on the credit history decided by the average monthly income, type of profession, proper bill payment patterns etc. of the person availing a credit card. But since the credit card system is the most unsecured form of loan, being completely dependent on the persons’ intention and promise to repay the loan, it also carries the highest rates of interest attached with it. This easy availability of credit cards also leads to the individual acquiring too many credit cards. The possession of too many credit cards has an adverse effect on the credit scores and rating of the individual. This poor credit rating leads to lending agencies charging these individuals a higher rate of interest on other types of loans like home loans etc.

Monthly Payment Higher then Monthly Income

The debtor is thus engaged in a vicious cycle which goes on increasing his debts and financial burden. Added to this is the fact that there is easy availability of credit made available due to a number of cards possessed by the individual. This leads to a tendency of over usage of credit cards to the purchase of objects that the debtor may require or wish to acquire, but may not have the immediate availability of income or financial means to do so.

The debtor on the other hand is not so adept at financial management, hence is not aware of the concept involved in the calculation of ratio of their debts to their average monthly income. This means that due to the over usage of easily available credit cards and the necessity of other loans like house loans etc., the debtor inadvertently finds himself in a completely skewed financial situation. In such a situation where the total payable loan amounts and minimum monthly payments combined are much higher than their average monthly income.

Delinquent Credit Card Accounts

This leads to irregular payments towards the outstanding credit card amounts and the loan installments. The debtor eventually ends up with a number of past due, over limit and sometimes delinquent credit card accounts. Credit card companies then apply late fee and over limit fee, in addition to that they also hike the interest rate that is normally charged on the credit card as a form of penalty. Not only does this increase the monthly payable amounts but also adversely and at time irreparably affects the credit ratings and scores of the individual. This is especially true in the cases of the individuals who end up with delinquent credit card accounts in the process.

The rates of interests that the debtor is forced to pay in such situations is in comparison much higher in all such cases compared to the rate of interests available on debt consolidation loans. Even unsecured debt consolidation loans which have a rate of interest slightly higher in comparison to the secured loans, prove to be more economical than the exorbitant interest rates charged by credit card companies. Hence both secured and unsecured types of debt consolidation loans are equally useful as means to consolidate credit card debts.