The Basics of Getting a Loan if You have Bad Credit
Bad credit is like the balding cousin that comes to holiday parties once a year, smelling of cheap booze and Marlboros, everyone would just rather ignore its existence. Unfortunately, just like everyone knows someone like that, everyone knows someone who has bad credit, and since ignoring it will never make it go away, it must be dealt with. The only way to reverse botched credit is to pay off existing bills and start building new scores by finding loans for bad credit.
Before applying for bad credit loans, be sure to get your free FICO Credit Score so you can feel empowered and know exactly what lenders see when they run a credit check on you.
Secured Credit Loans
These loans come in several forms. Secured credit cards are the safest way to rebuild a low credit score. Since they are backed by the borrower’s own money or assets, most banks will offer financing to them, however they are typically limited to a few hundred dollars so that they can ensure that they get paid back.
People with the lowest, most desperate credit ratings may not be able to find any other loans with bad credit until they have begun to rebuild with a secured credit card. These people should approach their own bank first to examine policies for getting a card of this type. Wells Fargo, however, is the leading bank to offer, and approve a secured card. Between their fair interest rates and limited fees and the fact that they will take clients with tumultuous credit histories, they are the best starting place.
Where to Find Loans for Bad Credit
Others, whose have credit history that is less troubled, may still be able to seek a loan for the purchase of a new vehicle, a home or even a start-up business. People with scores lower than 620, are considered subprime by most lenders. In such cases, the client can either seek to improve his or her credit (and this may take years) or find a lender who will work with what he or she has. The best subprime lenders are CitiFinancial, CitiMortgage Inc., and PHH Mortgage (formerly known as Cendant Mortgage).
PHH offers their qualifying clients with competitive interest rates on home loans, varying between 11.5% and 14.5%. They have been one of the leading home loans companies in the nation for over twenty years. Because of the large size of the lender, they can take on higher risk clients to finance a home for most credit conditions.
CitiFinancial and CitiMortgage are both subsidiaries of the main CitiGroup. Because the company was so devoted to working with clients in credit crunches, when the economic crisis fleshed out, their way of business was challenged. Fortunately, the struggle subsided and Citi is recovering. They are still among the largest lenders in the nation with trusted portfolios and competitive rates for most people.
Why Choose an Established Financing Company?
An established name is the most important factor in selecting a company to furnish loans for bad credit. While individuals with scores in excess of 700 should be able to find affordable loans with rates as low as 4.7%, clients with rougher histories should expect interest hikes between 7% and 12%. Any company that intends to charge more than 16% on a home loan should be avoided. High interest rates will both serve to make loans impossible to pay off and eventually cripple the holders into a no-pay, no-win situation.
Established names in the industry that offer loans with bad credit can be trusted to offer fairer interest rates. Also, like CitiGroup, if they are challenged by economic crisis, these vast holdings stand a better chance of keeping solvency. If the loan company vanishes, the loan holder has nothing to guarantee his or her assets.
Finally, established financing companies help you avoid companies that use hidden fees, exorbitant interest rates, or even scam you out of your money.