It becomes quite difficult to acquire a loan especially if your credit scores have been running low due to financial issues or simply because you are striving to create a credit for the first time. Further with recent changes pertaining credit reports, it is vital for an acquirer to understand what factors influence our credit score and how to make them better.
We have studied in the past how to use a home equity line of credit, applying to credit unions, and opting for a peer to peer loan in case of a bad credit score. Well if you have been unsuccessful in obtaining a much needed amount even with the above options for whatever reasons or don’t want to get bound paying high interest rates, then here the two important alternatives you can avail to acquire a loan with a bad credit.
Ask a Loan from Friends or Family
If someone from your online or professional connections doesn’t lend you, it’s time to ask a family member or a friend for the loan. Even though it’s from someone you’re personally attached to, but do take the process through a professional criteria with proper and legal documentation as you would do with an outsider.
In order to avoid and getting prepared for future complications, create a legal document stating the decided interest rate, payment conditions, any collateral you are presenting for the loan, and consequences of what shall happen if you fail to repay the debt.
If you need the loan to purchase a house, the loan must be properly secured enabling it to take the benefit out of mortgage interest deduction. The point of focus in obtaining a loan from a family member or friend must be a win-win situation for both and should always be opted as the last option. Remember no business transaction especially the one involving money should impact any personal relationship negatively.
Appeal to a Co-Signer
Another effective way is to find a reliable person with good credit who may accept to co-sign a loan with you. The person should be someone who truly understand your needs, trusts your repayment ability and is ready to offer a loan to you.
Do remember, in case you fail to repay the loan back somehow, the creditor will turn to the co-signer to acquire complete payment. Further, all the payment history will be registered on the credit reports of both of you. This is especially critical for the co-signer in instances when the borrower fails to deliver payments on time to simply does not live up to the expectations of the terms and conditions decided before finalizing the transaction.
However, if even both of the above options do not seem appropriate to you, try best to raise your credit score in order to qualify for a loan. Start improving your credit scores by paying the incurred bills in a timely manner and rather restrict yourself from overextending on credit cards and loans.