You can get loans with bad credit even and there’s no cause for despair provided you know certain rules.
You can always run into bad credit because of declaring bankruptcy or a foreclosing on your home. Even late payments or defaulting on installment payments may lead to dropped credit scores but there’s no cause for despair when it comes to getting loans with bad credit.
This is because there is always a chance to enhance your credit over a certain period of time and qualify for a fresh loan. However, improving your credit score is not the sole way of getting a loan despite deficient credit. For instance, if you wish to apply for a fresh home loan, you can do it as per the latest FHA guidelines even though you may have declared bankruptcy or foreclosed. This will help you buy a house with a relatively smaller down payment.
Getting the loan
Getting that much desired loan depends entirely on how you manage your money. Bad credit can be improved only by handling your available funds more responsibly and by always bearing in mind that your downward spiraling credit scores will always result in higher interest rates on your home loan. It’s only an improved score that will ensure a lower interest rate when and if you qualify for a fresh loan.
Improving your credit score becomes possible only when you improve your payment history by making timely payments, refrain from opening new credit lines and make use of your credit cards judiciously and sparingly, without overstretching lines of credit. You also need to make full payments and be in possession of at least four different credit accounts. Then you also need to show proof of consistent employment for at least one to two years and present a budget which you intend sticking to. You also need to consistently build up your savings by cutting frivolous expenses drastically and by not spending more than twenty five percent of the available credit on any one given credit card. Also try and pay off your credit card dues at the earliest without any carry forward.
In terms of FHA loans for home buying there is a distinct advantage of having to make a down payment of 3.5 percent only and a borrower needs to pay only one percent premium for the mortgage insurance up front, followed by a premium payable monthly for a period of five years. Even loans for cars and other vehicles are available for those with poor credit provided they meet certain criteria. The lender may set a precondition of keeping the vehicle as a mortgage till the loan is paid off. Usually in these cases also, the interest rates are slightly or maybe even substantially higher because the lender needs to keep his money protected as far as possible.
In order to get vehicle loans with bad credit, you also need to show proof of some source of steady income in a month in order to qualify. Also, your overall credit history will be reviewed and monthly payments will be taken into consideration before fresh loans are issued to you.