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High Risk Loans – The Things You Should Know About High Risk Loans

September 2nd, 2021

Every day, more people are losing their jobs and finding themselves in tough financial times. If you have ever been among these unlucky people, you may have damaged your credit rating and feel like you may not be able to get a loan. While it may be tough to find them, loans exist that are designed for people in just this situation. While it is sad that so many are struggling, it means that there is more demand for high risk personal loans, especially unsecured personal loans, and these loans are more available to people who might not have qualified for loans in the past. Bearing this in mind, here are the 8 things you should know about high risk loans:

Payday Loans are Expensive

You probably already know that payday loans should really only be a last resort. Unless you are absolutely sure you can repay them in full, they will typically cost you far more than they are worth. When extended for a full year, a $100 payday loan can have almost an 800% APR. That is astronomical compared to the rates that banks and even credit cards charge.

Payday Loans are Easy To Get

You are a grown-up, and only you can decide if it makes sense to get a payday loan. If you decide to apply for a payday loan, you will usually need to bring your ID, proof of income, a bank statement, and the date of your next pay day at a minimum. Some places also require you to have a certain level of income before they will give you a pay day loan. The good news about pay day loans is that you can get them the same or next day in most cases and there is typically no credit check, so your credit doesn’t have to be good to qualify for one.

Payday Loans do not Improve Credit Scores

You would think that a loan paid off in a timely fashion would help you build your credit. This is not always the case. Since these loans are not usually reported to the major credit bureaus, they do not have a bearing on your credit score.

You Can Get a Loan Online

One of the best places to find a high risk personal loan is online, and you can get an online loan from the comfort of your home. If you have a poor credit rating, it can be embarrassing to apply for a loan in person only to be turned down. Going online for your application, ensures that you do not have to put yourself in this position. Online Loans usually have low limits on the amount of money you can borrow, which might prevent you from taking on more than you can handle financially.

Tax Return Loans are Available

Known as Return Anticipation Loans (RALs), these loans are extended based on the anticipated amount of your tax return. Basically, they are cash advances with interest rates ranging from about 50% to over 500% APR. Keep in mind that if you file your taxes early, you can generally have your return within 8-10 days if you file electronically and use direct deposit. This is almost always a better option than a Return Anticipation Loan, but it is good to know that they exist.

Your Car Can be Used as Collateral

Known as Car Title Loans, these are secured loans that use the title of your car as collateral. Often, the loan is for less than the car itself is worth, so it is essential that you are able to pay back the loan because the lender can take possession of your car if you are unable to pay in a timely manner. You are going to need your car, right? So, be very careful if you decide to go this route. The one positive is that secured loans such as this often have lower interest rates than payday loans.

There are High Risk Loan Stores

You can sometimes qualify for high risk personal loans of thousands of dollars or more if you go to one of the personal loan stores that are available in some states. With the credit crunch in the United States, there are fewer of these stores than there used to be, but a few still exist. High risk personal loan stores specialize in giving loans to people with bad credit. These are not pay day loans that you pay back in a couple of weeks. These are genuine, non-collateral, unsecured personal loans that you pay back over several years. Sometimes, you can get a lump sum loan, and other times you may qualify for a line of credit where you free up more money to spend as you pay off your loan(it’s like revolving credit). The interest rate is typically high, but you have longer to pay it off, and it looks good on your credit report to have a higher loan awarded to you. These will probably take some work to find, but may be one of your best options.

Lenders Take a Risk, Too

Because these types of loans are really high risk to lenders, the fees and interest rates are typically higher for online unsecured personal loan options than they are for traditional loans. As such, you will probably have to pay more just to acquire one. Keep in mind that these are high risk personal loans to individuals whose credit doesn’t warrant better terms, but better terms are often available to those with better credit scores or some sort of collateral.

Other Things to Keep in Mind About High Risk Personal Loans

One more thing that may make the process of searching for a high risk personal loan simpler is to search in your state first. The regulations for high risk loans are different in many locations and lenders may be more apt to loan to people located closer to them. Having said that, there are many financial products online and available anytime, and it will just take a little of your time and patience for you to find the right one.

Once you’ve decided which option is best, make sure that you do some research first and compare the interest rates of each lender. This will keep you from taking a loan that could cost you more money than you realized it would.

Secured and Unsecured Loans – Vital Things That You Should Know

September 2nd, 2021

If an emergency takes places, it really makes you mad if you do not have the ready cash to handle the situation. Since your only other alternative for obtaining fast cash is asking for it from friends and relatives, your only viable option is to borrow the money. You have the option of taking out either a secured or unsecured loan. Which one are you going to choose?Unfortunately, you may not have a chance to get the one that you really want. Many times, your financial situation will determine the type of loan that you get in the end. The following article is going to describe some of the features of both secured and unsecured loans.

Facts You Should Know About Secured Loans

When you have a secured loan, this means that you have collateral that will be forfeited if you fail to make payments on your new loan. Your signature on the dotted line indicates that you understand your obligation to repay the loan. However, if you fail to keep your promise, he can take the personal asset that is associated with the loan. Obviously, the collateral has to be just as worthy as the loan total. This is the only way that the lender knows that he will eventually get his investment back. The lender is not stressing about lending you the money because will just demand your personal property if you do not make your payments.

The lender sees you as a credit gamble. This is why the interest rate on a secured loan is not that high. A secured loan is the best way for a person with bad credit to get a good interest rate on a loan. If you do not have good credit, there are not loads of loan options available for you. So, you might want to look into secured loans if you do not have stellar credit. Since the loan is pledged with your collateral, the lender does not use your credit history as a deciding factor during the approval process.

Things You Will Need to Remember about Unsecured Loans

An unsecured loan is the exact opposite of a secured loan. An unsecured loan is lacking your guaranteed property. The lender grants loan approval based upon the reputation of the borrower. If your credit history is almost spotless, then you might be able to get a lower interest rate on an unsecured loan. The lender does not think that you are a credit liability. If you do not have any hidden problems on your credit history and you need a loan without pledging any collateral, then you should look into getting an unsecured loan.

The quick cash loan is an unsecured loan. It was developed for those who do not have a good credit rating. The lenders who supply payday loans will not ask to see a credit report. You can get a fast cash loan in under 24 hours. However, this type of loan is expensive as a whole. The interest rate on this type of loan is extremely high. This is due to the fact that instant cash lenders never require for credit scores or collateral. This is one of the riskiest loans available.

A Couple of Concluding Words

There are both good and bad items about unsecured and secured loans. With a secured loan, you are entitled to a low interest rate, but the lender can take your property if you miss just one payment. Or, would you prefer to acquire an unsecured loan with a high rate of interest, but low possibility of the lender taking your collateral.

Do not forget that a lender can lay claims your property. For instance, when it comes to mortgages, a lender will not take your home right now. This is because many of them do not want to deal with the legal system. They will let you make arrangements to bring the loan up to date. But, then again, do not assume that unsecured loan lenders will shy away from going after your personal property when you fail to make payments. The will provide you plenty of time to pay the debt before they try to take you to court. Hopefully, you will not let it get this behind.

In conclusion, secure loans and unsecured loans are not the same. Your credit history will determine which one you will get approved for. But, if you get to decide, make a good decision.

IRA Loan-Loan-To-Value Ratio

September 2nd, 2021

When you apply for a non recourse loan against your self-directed IRA, the lender will examine the proposed loan’s LTV (loan-to-value) ratio before extending a loan. The LTV ratio enables lenders to assess risk on the loan. The loan-to-value ratio usually applies to loans borrowed for property investment. Because an IRA loan for property purchase falls in this category, it helps to know what kind of LTV ratio lenders expect for approving a loan request.

An IRA loan is riskier to lenders because the IRS requires it to be non recourse. This means it frees the borrower from personal liability in the event of loan default. Therefore, lenders usually offer an IRA loan only when the loan-to-value ratio does not exceed 65% for single family homes.

For condominiums, multi-unit properties, and apartment complexes, the loan-to-value maximum is lower, at around 60%.

Calculating Loan-to-Value

To assess if your IRA loan proposal is feasible, find out the loan-to-value for the IRA loan. Typically, the loan-to-value is the ratio of the loan amount to the value of the property.

Therefore, if you want to purchase property worth $100,000 and expect to borrow an IRA loan of $85,000, the loan-to-value ratio would be 85%. The LTV is too high, and it is unlikely that your loan application would be approved.

Take another example. If you want to buy the same property (worth $100,000) and need a loan of $65,000, the loan-to-value is 65%. This increases the likelihood of a favorable response from the IRA loan provider.

If you are planning to borrow $70,000 to purchase a condominium worth $100,000, the loan-to-value ratio is 70%. This is higher than the acceptable LTV on condominiums and multifamily dwelling units. However, if you are willing to offer a down payment of $40,000 and borrow only $60,000, the loan-to-value ratio becomes 60%, and the lender might be more willing to consider your loan request.

The loan-to-value cap may also be lowered if the lender feels that the property is a risky investment; that is, it does not yield good returns, requires too much investment, and cannot fetch sufficient rental. Other reasons for a reduced LTV could include poor condition of the property, a unique property, or unimproved property (land).

Investing Smartly

Usually, it is a good idea to scrape together the funds without taking out a non recourse loan if possible. Some people partner with relatives; others may clear out their savings to come up with the required capital. However, getting hold of the money through these channels is often difficult.

Many people are unaware that, in this situation, they can finance the property purchase in the self-directed IRA by getting a non recourse loan. While the lender provides 65% of the property price, you can use your IRA to fund the remaining 35%. Though this loan does not put IRA assets at risk, remember that it does put your IRA’s future ability to obtain a loan at some risk, so you have to invest wisely. Choose a property that requires minimum operating expenses such as maintenance, security, utility bills, tax, etc. and offers maximum returns in rent.

Before you approach the lender for an IRA loan, you need to have a self-directed IRA with at least the 35% of the property price invested in it.

A self-directed IRA loan allows the investor to buy property within an IRA without putting the IRA at risk (the property you buy can be foreclosed, but other IRA funds are not at risk from lenders). Because your IRA is also funding a portion of the investment, you need to select the property cautiously.

The Biggest Home Loan Mistakes to Avoid

September 2nd, 2021

Buying a Home and obtaining the right type of Home Loan from the Bank is always a challenging task. Why you may ask? I think everyone will agree with me if I were to say owning a Home is our single largest commitment in our lifetime. If you do not get proper financing done, it can cost you thousands or even tens of thousands in interest payment alone to the Bank.

For Investors, structuring the mortgage financing correctly will be even more critical as it can mean the difference between a profit or a loss. This can be the difference between creating a wealth generating property portfolio or never progressing beyond the first property investment.

Throughout my entire 14 years’ journey in mortgage financing, I have seen many property buyers who made wrong mortgage decisions which cost them huge sums of money. So how do you make sure that you will end up with the right type of property finance that will save you thousands in interest?

Here are the 10 biggest Home Loan Mistakes made by loan borrowers which I have gathered throughout my career in Mortgage Financing.

Understanding the Malaysian Mortgage Industry

For the past one year or so, we have seen many announcements being made by Country Bank with regards to the changes in the mortgage financing climate. Many home buyers are still unaware and were caught off guard on the recent changes. Take for instance, recently when I sold one of my properties the buyer only knew that there is a 70% financing cap on third property after he paid the deposit and went to the bank to inquire about financing.

With the new announcement on 100% financing with properties costing between RM100,000 to RM400,000 do take extra precaution on the loan approval by the banks. It’s rather rigid with many requirements that needed to be met. My advised for those who are going for this type of loan is to go to the bank and check the loan approval requirements before committing on the purchase.

For home buyers or investors who are buying new properties, do take the extra trouble to check on the latest changes before committing on your purchase.

Going for the lowest Interest Rates

One of the hottest topics when it comes to buying a property will be “which bank is offering the lowest rate in town”. My philosophy, “The Lowest Interest Rate does not necessary save you the most Interest”. Why is that so?

What might be seen as a good deal can sometimes come with strings attached whereby it costs more in certain situations or the loan offers less flexibility. Always remember to read (no need to have the word “between” because you do not need to read between the lines) the fine prints in your loan Letter of Offer before signing on the dotted lines.

Be very clear about your objectives for getting the loan and do your homework before you go to the Bank for your financing needs. With the objectives set, go and search for a home loan that suits your specific needs and objectives, and enables you to save the most interest.

Understanding The Bank’s Loan Packages

There are hundreds of different innovative types of loan packages out in the market. Borrowers are often spoil for choice because there are too many to choose from. Many borrowers do not do research on the loan packages and at the end of the day take packages that are not suitable for their specific needs and goals, costing them to lose large amounts of money in interest payments to the banks.

Pre-Qualifying Your Loan Approval

This is the most common mistake that many home buyers make. Many home buyers thought that they have no problem in getting their loans approved and often time ignorance can lead to losing tens of thousands paid as deposits. I have seen this happen many times.

The right approach is to go to the Bank before buying a property and check your credit standing. The loan officer can help to qualify your loan. At least, when you pay the house deposit, you pay with confidence.

How Banks Determine Credit Approval?

Sometimes it will work towards your advantage if you know how the Banks approve a loan. Banks use, Debt to Income Ratio (DTI) to determine whether you qualify for the loan. For example, if your income is RM3,000 and your total debt is RM1,500 your DTI works like this:-

RM1,500/RM3,000 X 100% = 50% DTI

(Debt) / (Income)

Different Banks use different ratio to determine their credit approval. Normally, banks approve loans with DTI ratio of between 33% to 70%. The recent announcement by Bank Negara on using Nett instead of Gross income when it comes to loan approval will greatly affect the DTI ratio.

Please be mindful that debt also includes your other borrowing such as car loans, credit cards and personal loans.

Be a Guarantor for someone else Loan

According to Banking Info (by Bank Malaysia), a guarantor will sign a legal contract which binds the guarantor to pay the debt of the borrower if the borrower is unable to service the loan.

Too often I have come across cases whereby the guarantor gets into trouble when the main borrower is unable to service the loan. I have even seen cases where the borrower ran away and cannot be found. In this situation the bank will go after the guarantor. The guarantor will only have 2 choices either to service the loan or face being sued for bankruptcy. When this happens, even people with good financial standing will find it difficult to obtain a loan. Be careful when you are asked to be a guarantor.

No Shopping Around

I had a customer some years ago who bought a 3 stores semi-D in Penang. At the time of purchase she went to the bank to get her home loan. The loan was approved by the bank with the condition that RM200,000 be placed as Fixed Deposit lien. She did not go to other banks to inquire and took up the offer. In 2009 during the economic downturn, her business took a dip and she needed the money to sustain her business but her bank was unable to release the lien. At the end she decided to sell her house at a loss and she also had to pay a penalty of 5% on her RM500,000 loan.

This situation can be avoided if she had gone to various banks and shopped around. Maybe she did not even have to put up the lien. Different banks have different approval criteria. One bank’s rejection can be another bank’s approval.

Failure to plan

Having a Home Loan is our single largest commitment. Many borrowers take on loans they cannot even afford after taking into account their income and expenses. It will be wise to do your own financial planning before committing yourself to any loans.

Failing to plan will also cause the borrowers to lose tens and thousands in interest. Remember, “Even small monthly savings can add to a big sum”. By making constant extra repayment to the home loan will enable the borrower to save a lot in interest and also to finish the loan much earlier than the original tenure.

Choosing a Mortgage Lender

I am very particular when it comes to choosing a mortgage officer who is going to process my loans. One of my criteria is that the mortgage officer must have at least 1 year’s experience. This is of upmost importance as their experience in recommending your loans will be paramount to determining your loan approval.

Should I buy Mortgage Reducing Term Assurance (MRTA)?

When it comes to buying Insurance a lot of borrowers try to avoid it. If you do not have a life insurance at least buy MRTA. MRTA will cover you in the event of death or permanent disablement. Even if you have life insurance you can still purchase MRTA for extra protection for you and your family. MRTA is much cheaper than the life policy but the coverage is limited.

I hope my article will help you to gain more knowledge of the mortgage industry in Malaysia and will assist you to prepare for your upcoming property purchase.

Great Tips to Choose a Car Loan

September 2nd, 2021

Every car is much more than a four-wheeled automobile. It’s owner’s glory, passion and a source of great admiration. Yes, a car is not just a means of transportation. It’s America’s pride and its ultimate ecstasy.

When one sets out to buy a car, several things are to be considered. Most people have an idea of what car to buy. But, there is confusion and dilemma when the topic of car loans comes up. This article will give you a detailed understanding of the many auto financing options available with you.

Money Before Everything Else

It is so true. You cannot venture out for buying a car when you have no idea about your finances. If you think car loans are going to do everything for you, think again. You will have to manage down payment and also ensure regular payments. Car loans are just to provide ease in buying.

Finding that perfect car loan requires you to carefully put together all your income and expenses and then preparing your budget. You will have to consider your savings and choose something that will not give you financial trouble.

A Plenitude Of Options

Everything depends on getting the information that suits your situation. So, don’t settle for the first financing option you get. Don’t just stroll into your local dealer’s office or your neighborhood bank. You must first do a complete research and analyze your condition and needs.

To help you make a good choice, here’s all the information about car loan types. Check out all the advantages and disadvantages of every option. It will help you make a wise decision.

Dealership Financing

A car loan with a car from the same yard- seems too alluring to ignore!

Most Americans choose dealership financing because it offers a one-stop solution. Dealers offer loans for new as well as used cars. You must know that most dealers are link between you and the lender. Such dealers won’t themselves lend you money, instead will sell you loan application to lenders.

This option is convenient but make sure that dealer is not charging a high interest rate. For that, you must research and be wary of any red flags. Also, don’t opt for any add-on if you don’t feel their need. It will help you reduce the cost.

Personal Loans

Banks and financial institutions offer loans for almost any purpose like buying a personal item or even a holiday trip. You can avail personal loans for buying your dream car. Now, this type of financing is useful when you need a loan for a smaller amount like $15,000.

Car Leasing

This is another option for you. When you lease a car, you only pay for the cost of using it. The biggest advantage with leasing is that your monthly payments will be significantly lower than the usual car loan payments.

You don’t have to worry about down payment and the lease agreement will get over in two-three years. You always have the option of buying the car at the end of lease agreement.

When you go for lease financing, don’t forget to negotiate the car price. Most buyers think that one must pay the full sticker price which is wrong.

Equity Loans

If you are one of those few lucky people who have sizable assets like a house, you can go for equity loans. You can avail a home equity loan by using your home as collateral.

Although the rates are lower and the interest is tax-deductible, there is the risk of losing your home.

Credit Cards

Though it may sound unusual, but there are many who opt for this method. A credit card can help you buy a car for a smaller amount like $10,000. You must have a low-interest credit card. With large competition, getting a low-cost card won’t be a trouble for you.

The only thing is that you will have to restrict other purchases on your card. Also, most credit card companies charge a 3% processing fees. If you are sure of paying this charge to the dealer, go for it.

Car Loans

This is as popular as dealership financing, if not more. In this type of loan, your car is used as collateral against monthly payments.

It is very good option if you make regular payments. The only thing that you need to keep in mind is that you won’t be able to finance a car older than six/seven years.

Online Car Loans

This type is just the blend of car loans and the internet. With technological advancements, you can get everything on the net and car loans are no different. Online lending companies have a large network of lenders and dealers who bid for your application. All you need to do is fill a simple online application form.

As there is a wide network, getting a loan is relatively easy. Also, the convenience of availing a loan without moving out of the house is very tempting.

You should only be concerned about the company’s reliability. You can check the website’s safety by going through their security certificate. Don’t go for a company that charges for loan quotes because there are many reputable sites that offer free quotes.

How To Choose That Perfect Car Loan?

Just go over with a fine-tooth comb

Once you decide on the type of car loan and apply, it’s time to scrutinize the loan quotes. Loan payments are important but it shouldn’t be the soul of your decision. There are several factors which are equally important. Before you rush to your decision, take a look at these variables.

Loan Term

Your loan term will have a huge impact on your loan. A longer loan term will mean that your monthly payments are smaller, but you may eventually be paying more interest rate. It is advisable that your term should be in accordance with the useful life of the car. Your loan should get over before the life of car to avoid the risk of an upside-down loan.

Interest Rates

Interest depends on factors like the loan amount, loan term, credit score, financial condition, etc. One important tip to lower loan rates is by making a substantial down payment. This will reduce your loan amount and also instill a sense of faith in the lender.

APR

The Annual Percentage Ratio will tell you about the total cost of the loan including all fees and charges. Most borrowers consider just monthly payments. But, it is impossible to compare different loan quotes with different loan terms. When you compare two loan quotes with the help of APR, you are taking into consideration all the variables.

Clauses

You must compare loan quotes on the basis of the clauses in the loan agreements. Few lenders prohibit you from refinancing your car loan for the first few months. Some lenders also offer zero percent financing for the first few months only and then charge a floating interest rate. So, check for such clauses which may cause problem in the future.

Charges And Penalties

Check the loan contract for origination fees, annual charges, prepayment penalty and penalty for missing out on a payment. Choose a lender that has lesser fees and doesn’t charge you for making early re-payment. The latter will be useful if you decide to refinance your loan.

Payments

It is important to know whether you are supposed to make payments weekly or monthly. If you can afford monthly payment, don’t consider any other option. This is so because it will give you the choice of making regular payments without any undue financial restraints.

Once you compare quotes on these factors, you will definitely get a winner. Choosing your car loan by this method may take time but what matter is the ease in making payments. Every factor is important in making your life simpler and your car buying experience more pleasurable. So, memorize these important tips.

Owing a car is a dream for many, but one who takes a wise decision can fulfill it in true sense. Car loans won’t be a trouble if you consider your needs and financial condition. Remember a good decision comes with a thorough research process.

Military Personal Loans for Up to $20,000 – Tips to Complete a Personal Evaluation

September 2nd, 2021

For military members in need to financial assistance, many loan programs exist, some that can even net you up to $20,000. These programs for military loans are designed specifically for members of all branches of the armed forces, including Army, Navy, Coast Guard, Air Force and Marines as well as members of the National Guard and the Reserves. The loan program is designed to offer special financing options and interest rates while also getting you the fast personal loan funds that you so desperately need.

Determine Your Need First

As a member of the armed forces, qualification for special military personal loans is similar to any other loan application that you will endure. The only difference is that the loan offer is tailored to your lifestyle as a military member or reservist. Therefore, one of the first steps that need to be taken in getting a military personal loan is deciding on your needs and abilities to provide repayment.

Generally, military personal loans are offered in amounts that range from $2,000-$20,000. They can be taken for many reasons, not limited to: home repair, vacation or wedding funds, college tuition payments, and vehicle purchases. Depending on the use of your loan, you may opt for a secured or unsecured military personal loan and that determination will further impact the interest rate that the lender will charge and how much money you will receive.

Secured vs. Unsecured Option

As a military member, you inherently understand the concept of risk – it’s something you do every day! Lending is a business of risk, so the less the risk, the better the deal. Therefore, choosing to secure the loan that you take will impact the deal that a lender offers you.

For military personal loans, like all personal loans, the use of collateral offered through a home, land or vehicle will give the lender assurance that, should you fail to repay your loan, he will have some recourse. These so-called secured loans come with the best (i.e. lowest) interest rates.

If you do not have property to leverage, your other option is an unsecured personal loan. This loan will be granted based on a number of factors which include your income and credit score. Because a lender has no guarantee that you will repay it, an unsecured loan will carry a higher interest rate and generally a lower principle amount.

Options for Bad Credit

Due to the special nature of military personal loans, those with bad credit are still welcome to apply, and they will often receive the funds that they need. This is because lenders who work with the military will take the security of your government income into consideration when issuing you the loan. If you have bad credit, however, opting for a secured personal loan is the best way to receive favorable interest rates and the maximum amount of $20,000.

A Loan Is a Loan

The convenience of military personal loans for military members with bad credit and good credit is indisputable. However, it is important to remember when conducting your evaluation that any loan is a loan and will operate in the same way. Just because this loan is especially reserved for a military member does not mean that the rules of repayment are any different or that mistakes in your repayment will not be reported to credit agencies. Therefore, before you decide on taking a military personal loan of $20,000 or less, you need to evaluate your individual situation and make sure that the loan fits comfortably into your budget.

Refinancing Student Loans With Bad Credit: The Surest Way to Ease Student Debts

September 2nd, 2021

There are three common misconceptions about students. First, is the idea they like to skip classes and scrounge around without a care in the world. The second is that funding avenues are rarely open to students with bad credit. And the third is that, for those who have managed to secure funding, refinancing student loans with bad credit is an impossibility.

The reality is that students work a lot harder than many think, not only making it to class and keeping their grades up, but also working part-time jobs to pay their way. The problem is that the repayment on loans taken out are far greater than their meager wages can meet. For that reason, student loan refinancing deal is necessary.

But just as with every loan, there are terms and conditions that apply when refinancing loans for students with bad credit. The trick is to find the right deal. When it is, then the financial weight on the shoulders of students is lifted.

How Refinancing Works

Finding a lender adept at refinancing student loans with bad credit is not a particularly difficult thing to do. However, it does depend on the type of loan that the student has taken out. If the loan is from a private lender, then it may be possible to negotiate a new repayment schedule.

However, it is essential that the small print is ready before agreeing any student loan refinancing deal. Some lenders will apply penalties to loans that are rescheduled, while extra fees might also be applied to the process.

The mechanics involved in refinancing loans for students with bad credit is essentially a buyout. The existing loan is paid off in full, which should mean that the new loan is smaller. For example, a $50,000 loan may have $10,000 paid off it after 2 years. The refinancing loan will buy out the remaining $40,000, marking the original loan as paid in full.

Advantages of Refinancing

There is only one reason why a student or even recent graduate might turn to refinancing student loans with bad credit – namely, to ease the financial burden that they face.

Depending on the terms of their loan, they may face repayments of several hundred dollars per month. If they are still in college, then the fact they are employed part-time, means they are under a severe financial strain. But by taking advantage of refinancing loans for students with bad credit, it may be possible to reduce that burden.

Recent graduates usually face heavy debts, making the pressure of finding full-time employment acute. Finding one is not easy these days, so student loan refinancing provides a chance to improve the situation while they get on their feet.

Refinancing a Government Loan

If the loan came through a government sponsored financial aid program, then there should be little trouble in refinancing students loans with bad credit. This is because, with the government guaranteeing the loan will be repaid, the lender is happy to accommodate a change.

However, you must find out how a refinancing deal will affect the loan status. Generally speaking, refinancing loans for students with bad credit means buying out the old loan. If this is done, then is the new loan considered government guaranteed?

Through student loan refinancing it is certainly possible to reduce the monthly outlay required to repay the loan. That can make college life that little more enjoyable, though keep in mind that refinancing student loans with bad credit does not mean the pressure is off completely.

Applying for Personal Loans With Bad Credit Does Not Need to Be a Chore

September 2nd, 2021

To some of us, the task of applying for a loan is a chore even at the best of times. Not only do we have to fill out application forms and produce the required documentation, we must also wait to learn if our application was successful. This can be a nervous time, especially since applications for personal loans with bad credit are not usually accompanied with great confidence.

But applications for loans with bad credit do not have to be the chore that they seem. Nor do they have to be nervous uncertainties that leave us sitting on the edge of our seats. In fact, so long as the application itself is in proper order, there is every reason to believe that it will be successful.

This is because, for every lender, the chief concern when assessing an application is not the credit rating of the applicant, nor even the size of the loan itself, but that the monthly repayments are affordable and the schedule will be stuck to. So, getting personal loan approval despite poor credit is not impossible, especially when some simple steps are followed.

Choose the Right Loan

The first thing to do is to understand fully the type of loan that the application is for. There is more than one type of personal loan with poor credit, and there is likely to be one best suited to your circumstance.

A loan term can range from 2 weeks (a payday loan) to 35 or 40 years (a mortgage or home loan). What is important to understand is that the longer the loan term, the greater the amount of interest paid over its lifetime. However, applications for loans with bad credit can also be affected positively by the term because the longer the term the smaller the monthly repayments.

The size of the loan is an important factor in getting personal loan approval despite poor credit. But so long as the monthly salary of the applicant can comfortably cover the repayment amount, even a large loan of $50,000, for example, can be approved.

Secured versus Unsecured Loans

Perhaps the most significant difference is that between secured and unsecured loans. An unsecured personal loan with bad credit can be more difficult to gain approval on simply because there is no collateral provided, and therefore the application is considered a higher risk by lenders.

When it comes to secured loans, the bad credit tag is rather insignificant since the collateral itself makes the loan a safe investment. For this reason, applications for loans with bad credit, when accompanied with security like an item of jewelry or a car, is welcomed by lenders.

Though it might be inconvenient, the fact that the loan is secured means the loan can be recouped should the lender default. So, personal loan approval despite bad credit is far more likely.

Advantages of a Payday Loan

When the minimum of fuss is preferred, as well as the maximum of speed in getting approval, the best personal loan with poor credit option is a payday loan. Typically, applications for loans with bad credit can take a day or more to be approved or rejected, but this loan can be approved in just an hour.

However, they are also required to be repaid in the extreme short-term (2 weeks to 30 days), while such personal loan approval despite poor credit occurs because it is granted against an upcoming pay check.

So, the only thing that matters is that the paycheck is large enough. These personal loans with poor credit are ideal for accessing emergency cash and require basic criteria to be met.

Long Term Loans With Bad Credit Are Practical Financial Solutions

September 2nd, 2021

People generally have mixed feelings regarding long term loans. On the one hand, these loans offer the chance to reduce the monthly repayments due. But on the other hand, long term loans, with bad credit a factor especially, often means a large sum of interest is paid over the life span of the debt.

In truth, when we look at the amount of interest paid we can get a nasty shock, even when the term is normal. But the thing to remember is that long term loans with bad credit are never going to offer the perfect conditions. This is because a bad credit rating means the interest rate is higher, something that borrowers need to accept.

However, in relation to the practicalities of handling any debt, the chance to keep monthly repayments as low as possible is a major plus. And since most personal loans approved despite poor credit provide an opportunity to improve credit scores, the added expense can prove to be a worthwhile investment, helping to increase loan options in the long run.

Loans to Improve Credit Ratings

It might seem that borrowing money to improve loan options is somewhat illogical, but since credit ratings indicate the level of trust a lender has in a borrower, there is little chance of improving the situation in any other way. Getting long term loans with poor credit hanging over our heads is not easy, but there are ways around the problem.

For a start, seeking a small loan rather than a large one, allows the borrower to repay a loan in full without causing too much financial pressure. A loan of just $1,000 can be repaid over a few months, and once it is, the credit score is adjusted.

With long term loans with poor credit, however, the size of the loan can be larger because the principal is spread over a longer term and, therefore, the monthly payments are lower. So, while a loan of $10,000 over 24 months may have payments of $500, the same sum over 48 months may be repaid at $350 per month.

Thus, personal loans approved despite poor credit can be more manageable over a longer term.

Versatility of Long Term Loans

While long term loans with bad credit are usually costly in terms of the amount of interest paid over the lifetime of the loan, there is a lot of versatility too. For example, an applicant with a credit score of around 500 – considered well below the 700 good credit score – means that small loans of perhaps just $1,000 to $3,000 are realistic.

But these sums are unlikely to clear up existing debt. In terms of debt consolidation, large sums are necessary and long term loans can provide that. Between credit card debt, existing loans and bills that are outstanding, the total debt can reach more than $50,000 quite easily.

In such cases, it is possible to get large personal loans approved despite bad credit if the loan is long term. Lenders are happy to approve them because, firstly, they earn a higher amount of interest and, secondly, because the repayments are easier for the borrower to manage.

Finding a Long Term Loan

It is not difficult to find long term loans with bad credit, especially when the array of online lenders are consulted. Online lenders usually offer the best deals, so when it comes to getting long term loans with poor credit they are the best option. And it is important that these lenders promising to grant personal loans, approved despite bad credit, are checked out on the Better Business Bureau.

Still, it is unwise to rule out your local bank when seeking long term loans with poor credit, especially if your relationship with them is good.

Before Opting for a Personal Loan

September 2nd, 2021

By virtue of being an unsecured loan, personal loans have a very high rate of interest attached to it. So one should consider taking a personal loan only if:

  • You do not have an asset/security against which you can get a loan. For e.g. if you have an FD you can pledge, a secure loan might make more sense.
  • You have some visibility on your cash flows and are sure that you will be able to repay the EMIs (Equated Monthly Installments) in time. Else you are bound to enter into a debt trap.
  • There is an emergency and you need funds immediately. A personal loan can be taken because the processing time is much lesser on account of minimal documentation.

Opt for personal loans only to meet your essential needs which cannot wait. It should be your last resort. Taking it for satisfying leisure needs can prove to be costly i.e. for gambling, buying a new car (a car loan is a better bet with a lower interest) etc.

Before you choose your personal loan:

Calculate the cheapest loan offer: These loans come with very high interest rates ranging from 14% to 25%. Compare interest rates and get the complete picture by understanding the annualized interest rates for each offer. Then figure out the total amount of repayment you need to shell out with all the offers before opting for the loan of your choice.

Processing fee ET AL: You need to keep in mind the processing fee and other fees that will be levied when you apply for your personal loan.

Prepayment penalty check: Ask upfront if there would be any penalty payments for prepayment of the personal loan at any point in time. More often than not loan consumers tend to pay up their loans earlier than planned to be rid of debt. Hence, it’s important to know if your personal loan offer allows part prepayments. If that is the case, then you should be aware from what time frame in the loan period you can start prepaying and understand the cost you incur due to such prepayments in part or full.

EMI and tenure: Evaluate all loan offers. The first condition for loan offer selection is the total money outflow that the loan will cost. The second factor is the EMI. A loan offer with a lower EMI and a longer tenure may seem attractive, as it could be easy on your purse strings, however not all such loans prove to be cost effective in the long run. Hence, first calculate the total loan cost and then try to opt for a higher EMI, which you can comfortably manage to enable a shorter loan tenure.

Keeping track of your credit history: Especially in the case of unsecured loans, your credit history, which is recorded by CIBIL (Credit Bureau India Limited) plays a critical role in your loan application being accepted. A good repayment track record ensures an instant loan approval but brownie points in the form of more attractive interest rates.

Who is eligible for a personal loan?

The eligibility criteria and their specific details may differ from banks to bank based on their perception of the risks associated with such loans. However, nearly all banks divide the potential borrowers into three categories:

  • Salaried individuals
  • Self employed individuals
  • Self employed professionals

Other factors which are taken into consideration are, age, residence, work experience, repayment capacity, past obligations and place of work.

What documents are required for personal loans?

Personal loans require the least number of documents, making it the fastest to be approved. Typically, financial institutions would require proof of identity, residence, income and also 3 to 6 months of your bank statements. Some banks also require guarantors and the same set of their documents.

Alternatives to a personal loan

As indicated in the beginning of the article if you have access to investments that you can pledge, like shares, fixed deposits, gold, insurance policies etc. you can obtain a loan against them. The interest rates are lower compared to personal loan interest rates.