October 19, 2018

How to Get a Loan With Poor Credit Rating

In the U.S., your credit score is a very important factor in applying for financial products, whether they are loans or advances. If you don’t have a good credit score, you might find it difficult to find loans and access other kinds of credit. Even if you get one, you might be in for higher interest rates than other people who have better credit. The reason is that lenders often worry about the ability of people with bad credit to pay a loan back and they want additional compensation based on the risk.

However, most people do not have a perfect credit score in reality. The truth is that a big portion of the United States has poor credit. So if you are someone who is having issues getting the financing you want for things in your life, do not give up. There are loans for people with bad credit available. There are multiple ways to get such a loan even if you don’t have great credit. A lot of lenders will give people a second chance, even with a spotty credit history.

What a Personal Loan Entails

 

A personal loan is one of the more popular kinds of financing from traditional lenders. This is also called a term loan. That means that you pay the loan back over a particular length of time. The interest rate can be fixed or variable. It is a fairly straightforward loan, making it easier for most people to understand and thus more common.

One of the primary benefits of a personal loan is that it less complicated than other types of credit. This is because you are typically provided with a fixed payment that does not change. You can pay this back easier because you know how to budget for it and exactly what to set aside.

What Can You Use a Personal Loan For?

 

You can use a personal loan for almost anything you want. A common example is using one for a car loan. This is usually a 5-year term and lets you afford the vehicle that meets your needs instead of having to settle.

You might also use a loan to get a laptop, phone, or even just some extra money while you look for work or move into a new house. The interest rates on personal loans can be much lower than a credit card so they are popular for certain purchases.

What Chance Do I Have Of Getting One?

 

If you have moderately bad credit, it will be easier to get a loan than if you have very bad credit. There are many factors that go into your loan chances. The first indicator is your credit score. But don’t worry, you can improve your chances in other ways too.

If you have a good income and other assets, these can factor into your likelihood of getting a personal loan. If you recently got a new job or expanded your business, you could be in luck. The key is to keep attempting to improve your income and assets while paying down previous debts that you may owe. That will make your chances improve so you can get the financing you’ve been wanting.

When it comes to getting personal loans, it can be difficult if you don’t have great credit. Luckily, however, you do have options. You don’t need to suffer the reality of not having access to additional funds. If you use the advice above, you can get the help you need. That way you can bridge the gap due to increased bills, loss of a job, or other life circumstances that may be causing you financial stress.

Boomers can lend credit score to boomerang kids

Money is the main reason 26 percent of American millennials boomerang back home to live with their baby boomer parents, and why so many other millennials rely on parental assistance long after college graduation.

About 63 percent of all millennials don’t have a major credit card and more than 86 percent of those seeking loans are declined or charged sky-high interest rates. That leaves millennials hard-pressed to build a credit history and declare financial independence from Mom and Dad.

The founders of the Israeli company Backed say they have a solution that benefits both generations.

By reinventing the co-signing process and using machine-learning algorithms cooked up in the company’s Tel Aviv R&D center, Backed’s online platform allows parents (“Backers”) to lend their credit history to their children in order to help them secure a loan at attractive rates.

Already up and running in New York, New Jersey, Florida, West Virginia and Arkansas — the five states that do not require a lender’s license — Backed recently raised $1.5 million in seed funding toward a national rollout by the end of 2016. Vice President and co-founder Gilad Woltsovitch explained how Backed will achieve that goal by partnering with federally insured banks in the other 45 states to administer the loans originated on the Backed website.

Woltsovitch said that taking co-signing risks out of the equation is among the unique aspects of Backed.

“Other lenders approve or decline, period. We’re the only ones that have a progressive loan application. You qualify if you have a Backer who qualifies, and you can optimize your [interest] rate by adding another Backer or connecting with other accounts. What’s also unusual is that we digitized the whole co-signing experience,” he said.

Backed’s novel risk model is another factor that differentiates it from competitors (such as Upstart) in the loans-for-millennials space.

“Ordinarily, co-signers are exposed to the risk of having to pay the whole amount if the loan defaults,” Woltsovitch said. “Traditionally, they are notified after the default when there are already accumulated fees and penalties, and by that time the child’s and parents’ credit scores are damaged.

“We offer Backers the opportunity to control the status of the loan. The moment there is a failed payment, both borrower and Backer are notified and have 15 days to pay the missing amount without any penalty. If there’s an ongoing problem, Backers can jump in and cover the missing amount before the credit bureau finds out about it.”

Like many Israeli startups, Backed has a personal backstory. In this case, it was Woltsovitch’s experience in the American credit market as a non-U.S. citizen.

Arriving in the United States in 2008 after earning his master’s degree in art sciences in Holland, Woltsovitch soon had a steady income and savings. Yet without any credit history, he was forced to pay a lot of money up front for an apartment and was subject to higher fees and rates on loans.

“That is how I encountered the problem with the credit system and how it’s challenging to kick-start your credit record,” he said.

That year, a worldwide financial crisis resulted in regulatory measures that severely limited access to unsecured loans and credit cards even for young adults with U.S. citizenship. In 2013, Woltsovitch and Israeli venture capitalist Kfir Moyal started the research that led to co-founding Backed in mid-2014. 

“We saw a huge boom in online lending, but about 90 percent of applicants are rejected for credit,” Woltsovitch said. “Then we learned about peer-to-peer lending. We really like emerging industries and we wanted to see where there was space for optimization and improving conversion rates.

“That is where we came up with [the] idea of [a] parent lending kids their credit score rather than cash. We believe this solution helps both sides because it allows kids to build a credit history and relieves the financial burden on parents.”

With its headquarters in New York and its R&D in the WeWork co-working space in Tel Aviv, Backed plans to allocate about half its new cash infusion to further developing its product and employee base, and half to customer acquisition and revenue growth.