Do you need money for a home, car or to settle an immediate pressing need, but it seems impossible because of your bad credit score? Your credit score is the first things that lenders check for to determine if you are worthy of to receive the loan you seek, the process is usually not a happy one as lenders will not grantfunds to candidates with bad credit score. However, hold your horses; there are many ways to get a loan with a bad credit score in San Francisco.
What is a Bad Credit Loan?
Bad credit loans are personal loans that are given to borrowers with bad or no credit score. There are various loan types and different financial institutions that offer them such as banks, credit unions, private lenders, and online lenders among the majority. Although, bad credit loans are very expensive as the lender charge higher interest rates to clients with bad credit score.
What is a Bad Credit Score?
Any score below 630 is considered bad and you can know your credit score from your bank or access it online from your bank statements or account. You can also get a free credit score rating online A good credit score is an essential part of your loan application and is determined by your credit history and how often you pay off your debts. Your credits score is good when you pay your bills and existing bills on time, but will go down when you fail in your payments or debts.
Signs that you have a bad Credit Score
- You have a history of paying your utility bills late
- Your checking account is overdrawn
- You pay a higher interest rate than what is displayed for a getting a loan
- You can’t get contracts from cell phone companies
- You make the minimum payments on high-interest credit cards instead of making a down payment on a debt
How to Bad Credit Loans Work?
So, before you decide on getting a loan with your bad credit, you have to know that lenders will charge you higher interest rates depending on how bad your credit score is. However, you don’t need a good credit score to qualify for a bad credit loan. Lenders will typically not provide loans over certain amounts to individuals with bad credit.
Conditions needed to get a Bad Credit Loan
- You have to be 18 years and above
- You must provide a valid and working email address that belongs to you
- You must provide a working home and office telephone number
- You must have a savings account registered in your name
- You must have a regular source of income either self-employed or fully employed with social security benefits
- You must provide proof of citizenship including social security number, residency permit etc
You have to know that when lenders charge you high interest for borrowing money from them it is usually because they are also trying to cover up for funds from other borrowers defaulting with their payments. Bad credit might sound good when you are desperate for cash, but it is advisable to look closely into the entire process before committing to it, else you might end up paying for a one time loan throughout your lifetime.
Types of Bad Credit Loans
Just because you are broke and in dire need for money does not mean you are without an option. There are two kinds of bad credit loan options; they are the secured bad credit loan and the unsecured bad credit loan.
Secured Bad Credit Loan: this type of loan process requires the borrower to present collateral to secure the loan. Valuable items such as a house, car, jewelry or an asset can be used as collateral to secure the loan. The lender has the legal authority to seize the property of the client if he fails or defaults with his payment. On the flip side, the client can use their paycheck to secure a bad credit loan. This process involves the lender to collect a check equal to the amount and the interest to be borrowed. The check will be cashed if the lender fails to pay up their loan.
Unsecured Bad Credit Loan: in this case the borrower signs a document or contract guaranteeing to pay the loan on a specified date according to the rules and regulation of the loan. The document serves as a legal tool for the lender to pursue their money in a court or the client pays through personal installment loans, student loan, and credit card.
Are Bad Credit Loans Risky?
Yes, they are very risky. Most lenders are supposed to work with borrowers to improve their credit score. However, if your lender doesn’t seem to care about your credit score and is willing to lend you money; chances are they you are been ripped off with outrageously high interest rates. Our advice is to look for other options to get the loan like from family, friends, from your job or work with your bank to improve your credit score and get a secured loan from the bank or lending houses.
How Bad Score can affect your Auto Credit Loan
A credit score of 740 or higher should get you a great interest rate on a car loan. However, a lower credit score might mean paying a huge amount of extra dollars on the interest to acquire a car loan. Lenders like to know that borrowers will pay back every cent borrowed and a default in paying credit card debt might spoil everything for you. A bad credit car loan isn’t like any other auto loan; there are requirements that need to be met because most dealers don’t have the financial backing to lend you the kind of amount that you need for a car and are normally designed for buyers with bad credit or no score. They are also good at helping you fix your credit score so that you can repay your debt and keep driving.
The Requirement for getting a Bad Credit Car Loan
The first thing is to know your credit score so that you can know if you are deserving of the auto loan.
Budget: this involves more than just the ability to purchase the car but also the finances to maintain the care such as fueling, insurance, repairs, and basic car care routines. This is to ensure that you don’t overburden yourself and default in repaying your debt.
Have a Down Payment: a down payment on an auto loan will reduce the amount of monthly interest payment. The down payment required by most lenders is a minimum amount of $1000 or 10% of the car’s selling price in the market.
How does the Bad Credit Car Loan Work?
Car dealers offer to finance through their chosen lender but you don’t have to use the lender designated by the car dealer. You can use your own lender to help me negotiate the best car loan rate for you and probably save money during the process. Salesmen usually are more interested in the monthly interest. However, if you have a down payment, the price of the car is discussed straight away and this gives you some leverage to beat the price of the car to get the best offer they have.
How to shop for a Car with Bad Credit
Contrary to common belief, you don’t have to settle for the first lender or financing offer you receive. Consult with a couple of lenders and compare their auto plan before choosing one. You can source for bad credit car loans from banks, finance companies, car dealership, dealer financial services group, credit union, and banks.
Step to get an Auto Loan with Bad Credit
Ask yourself if you really need a car: is the car to ease your transportation problems or for luxury. If the car is not an emergency, then you probably should put it off till the future when you have enough funding to pay for the car without bad debt or with better credit score. However, if you must get a car on bad credit; get ready for high-interest rates or a rejection or perhaps, you can work to better your credit score.
Affirm your Credit Score: don’t allow lenders use you to make money by declaring that your credit score is bad; check you score yourself and be sure that nothing can be done or seek out what can be done.
Visit Different Shops: before making any decision; visit more than one lender and car dealer shop before making a final decision. Don’t let a bad credit score limit your options or allow your lender define your decision. Do your research on lenders rate to avoid being taken advantage of.
Choose A Shorter Loan Period: don’t allow long payment terms to entice you. This usually means that the interest rates are more and you can be debt free for a short period. Shorter loan period makes you work harder to get the loan repaid faster and better your credit score too.
Limit your Search Period: the more time you spend searching for a car, the more damage you do to your credit score and the slimmer your chance of getting the car loan with your bad credit. So it is advisable to quickly go through many lenders and car dealers are as fast as possible
Go for newer cars than older cars: older model cars tend to cost more and incur most interest rate than newer cars. However, it is possible to get a good deal on an old model car with the proper lender and dealer.
Get a Cosigner:This is bad and good. The cosigner can be a family member or friend that is financially buoyant and willing to help. However, the cosigner should know what it entails because they will be held responsible if their payments are not updated or paid on time.
Things to avoid when shopping for an Auto Loan
- Avoid “buy here pay here” deals. They don’t hurt your credit score but you could pay more than necessary for a car deal
- Don’t get too excited by false promises that salesmen make to you. Always make a thorough check of the care before you make any payments.
- Don’t base your shopping experience on your bad credit score and avoid taking more risk than you are eligible.
- Avoid loans that will add to your debt and spoil your credit score the more
- Never sign any document without reading it through
Always finalize the deal before leaving the dealers or lender’s office
What to do if you get an Auto Car Loan with High Interest
Refinance: this is not known by most people, but a car can be refinanced too. The best about refinancing your car is that it increases your credit score. Always talk to your auto lender to know your options.
Pay more than the minimum on time: this is another way to reduce your debt and increase your credit score is by paying more than your minimum monthly rate to cover your loans and help your FICO score.
A bad credit history or mismanagement of funds can thwart your credit score and make receiving loans difficult. However, San Fransisco is full of lenders, banks, and union homes that are willing to offer you the needed money with a payment plan. Nevertheless, it is wise to ask your bank for an auto loan before you go to a car dealer or a lender. Smaller banks might not be able to help you because of their financial standing, but you might be lucky with larger banks. After all is said, before going to an auto financing lender and a car dealer; always check with your bank to know all your option.
Remember, a bad credit score is not a limitation to getting a car, home or student loan, not paying is the problem and Car Loans of America your dreams will come through.