How to Get a Loan with Bad Credit

Everyone needs extra money from time to time, and this doesn’t change when you have bad credit. Unfortunately, your options become much more limited when you have bad credit. This makes it difficult to qualify for a loan, even when you need it to cover a financial emergency.

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Whether you’re wondering how to get a car loan with bad credit, pay hospital bills, or even qualify for a mortgage with bad credit, we’ll show you how to improve your credit score and get your finances back on track.

Not only will you find out how improving your credit score can save you money on your next loan, you’ll also learn steps you can start taking today to start building your credit.

How does bad credit affect your ability to get a loan?

Before you start looking for a loan, it’s important to get an accurate understanding of your credit score. Most lenders use the FICO scores, which ranges from a low of 300 to a high of 850. A “bad” credit score is typically defined as lower than 629.

If you want to know your exact number, you’ll have to purchase that information from FICO. But if you simply want to see what kind of derogatory items are on your credit report (and potentially fix them), you can request a free copy of each of your three credit reports.

It’s a good idea to take advantage of this free service every 12 months to check your reports for accuracy even if you’re not actively looking for a loan.

Once you’ve established whether or not your credit score is low, find out the exact impact bad credit can have on your life. Bad credit affects you both financially and emotionally, but the most expensive effect is the type of loan you’re able to get.

Higher Interest Rates

When applying for a loan, the lender will charge you higher interest rates for a poor credit score. That’s because your lender sees you as a greater financial risk, so they charge higher rates in case you default on the loan.

Higher interest rates can really add up over the life of the loan. Keep reading to find out exactly how much.

Application Denied

Even worse than getting a high interest loan, you may not qualify for a loan at all if your credit score is too low. If the loan is for something non-essential, then this may not be that big of a deal.

But it can significantly affect your well-being if you have serious financial needs, like car repairs or medical bills. At this point, some people decide to turn to “no credit check” lenders who offer predatory products like payday loans.

Though short-term, these loans have extraordinarily high APRs and often lead people into a cycle of never-ending fees for what started off as just borrowing a few hundred dollars. Luckily, there are many ways to avoid ending up in this situation.

Where can you get a loans for bad credit?

If you do have a poor credit history, some reputable lenders might be willing to offer you a loan. Just remember, you’re going to be paying a lot of interest on top of the amount you borrow.

Check Out Our Top Picks:

Best Personal Loans for Bad Credit

It’s always good to check with your local bank or credit union, although they are likely to have stricter lending standards and a slower origination process. If you have an existing relationship with a bank or credit union, they may be willing to help you out.

Many online lenders offer quick approval and funding, even for borrowers with a low credit score. Just be sure to do your research to make sure the company operates a legitimate business.

Before taking out a personal loan from anyone, check to see what kind of reviews that company has received and what its Better Business Bureau rating is.

Bad Credit Lenders

Here are a few online lenders that offer bad credit loans:

  • Avant is a major online lender offering bad credit loans that only requires a minimum credit score of 580.
  • MoneyMutual is a lending aggregator that offers short-term loans to borrowers with low credit. You do need to have a consistent monthly income of at least $800 to apply.
  • CashUSA partners with lenders offering loans to people with bad credit between $500 and $10,000. The credit and income requirements are flexible, but the interest rate could be pretty high.
  • BadCreditLoans.com is a lending marketplace for borrowers with bad credit who need quick access to cash. You could receive up to $10,000 with loan terms up to 60 months.
  • PersonalLoans.com is another lending marketplace that offers personal loans to borrowers with poor credit. You will need to prove that you have a monthly income of at least $2,000 to qualify.
  • OneMain has physical locations in addition to its online presence and actually has no credit score minimum. The company says its average customer has a credit score between 600 and 650. Don’t get too excited, though – your APR could be as high as 35.99%.

Things to Know About Applying for a Bad Credit Loan

If you do decide on getting a bad credit personal loan, keep a few things in mind so you don’t damage your credit scores even further. First, limit your number of loan applications.

Every time you apply for a loan, the lender makes an inquiry on your credit report. This lowers your credit score anywhere between one and five points depending on your situation.

That might not seem like a lot, but it could affect your interest rate if you’re on the border between “bad” and “fair” credit. Plus, many lenders view a large number of inquiries as a risk factor, especially if they’re all made within a short period of time.

Thoroughly research potential lenders in advance and see if they offer to make a soft pull on your credit rather than a hard one. That way you can compare interest rates without hurting your credit even more.

Going through a lending marketplace is a good way to limit your credit inquiries as well. With just one application, you’ll receive quotes from multiple lenders that are willing to work with you.

How much extra interest should you expect to pay on a loan with bad credit?

Even after getting approved for bad credit loans, there’s no getting around the fact that it’s going to be an expensive decision. Just how expensive depends on the terms and conditions of the loan.

On top of your interest rate, your lender may also charge an origination fee. Unfortunately, this is a pretty universal concept, so there’s not much you can do to avoid paying it.

The origination fee is usually charged as a percentage of your loan amount, so – just like interest – the more you borrow, the more you pay. You don’t have to come up with the cash upfront; instead, the fee is deducted from your loan.

Make sure you account for this deduction in your loan request. For example, if you need a $20,000 loan and there is a 3% origination fee, be sure to request $20,600 because 3% of $20,000 is $600.

Annual Percentage Rate

A helpful tool in determining the best interest rate and applicable fees is the loan’s annual percentage rate or APR. This number helps you compare offers that have different rates and fees to see which is better on an annual basis.

However, APR does not account for the loan term, which is the amount of time it will take you to pay off your loan. A loan may have an extremely low interest rate, but if it takes 10 years to pay off, you might actually end up paying a lot more in interest.

There are a lot of variables to consider when figuring out how much interest you’ll be paying. Let’s look at an example to help put these facts and numbers into context.

Auto Loan Calculator

Let’s say you want to figure out how to get a new car loan with bad credit. By using an online calculator, you can determine if making the purchase now is worth paying the extra interest compared to fixing your credit first.

According to Experian, the average length of a new car loan is 67 months and the average loan amount is $28,711. For simplicity’s sake, let’s say you get a 60-month (five year) loan for $28,000. Here is how MyFICO estimates different credit scores to stack up in the same scenario.

The differences in the amount of interest paid over the life of the loan are jaw-dropping: a person in the lowest range pays nearly $9,500 more than someone in the highest range. So you wouldn’t be paying $28,000 for that new car, you’d actually end up paying almost $37,500.

Bumping your credit score up just 31 points from a 589 to a 620 could save over $4,600 in this scenario. Think of how many paychecks that adds up to before you decide on getting a loan with a bad credit score.

Fico Score APR Monthly payment Total interest paid
720 – 850 3.312% $507 $2,421
690 – 719 4.636% $524 $3,424
660 – 689 6.751% $551 $5,069
620 – 659 9.474% $588 $7,262
590 – 619 13.848% $649 $10,958
500 – 589 14.944% $665 $11,918

Should you fix your credit before applying for a loan?

If you want to potentially save thousands of dollars on your next loan, then yes, you should consider fixing your credit before you apply. While some credit components take time to improve, there are many actionable steps you can take right now to improve your credit scores.

It’s always better to get a head start on the process rather than waiting for a financial emergency. If you don’t need the money right away, take the time to fix your credit now so you can save big when you are ready to borrow.

Here are five steps you can take right away to fix bad credit:

1. Dispute any errors on your credit report

Before you attempt to repair your credit, you want to know what you’re dealing with first. So the first place to start is by reviewing and disputing any errors on your credit report. And checking your report will give you a good idea of where you can begin making improvements.

2. Start making your payments on time

One of the easiest ways to raise your credit score is by making your monthly payments on time. Your payment history counts for a significant portion of your credit report, so if you struggle to make your monthly payments on time, your credit scores will take a hit.

And you may be surprised to learn that this applies to more than just lending products. It also includes credit cards, personal loans, home loans, utilities, and even your cell phone bill. Once you have that under control, start paying down any existing credit card debt.

3. Lower your credit utilization ratio

Your credit utilization ratio accounts for 30% of your credit score, meaning you’re not just judged on the amount you owe, but also on the amount you have borrowed compared to the amount you are allowed to borrow.

If your credit cards let you borrow up to $10,000 and your balance is $4,000, your credit utilization ratio is 40%. Ideally, your credit utilization ratio should be below 30%, so try to make extra payments until you can reach that ideal range.

4. Consider using a credit repair service

If you’ve already taken the steps we outlined above with minimal success, then you may want to consider hiring a professional. A credit repair service can dispute any negative items on your account and help improve your credit score faster than if you’re doing it on your own. Here is our top choice for a credit repair service.

By law, an item must be removed from your report if the creditor can’t verify it within 30 days. By having a tireless advocate on your side, you’ll make sure your current and past creditors are following the law. They will help you make sure your credit history has been updated to accurately reflect your financial history.

5. Show a lender can you repay the loan

Once you’ve put in the work to raise your credit score, it can help to look for ways to show an online lender, bank, or credit union that you’re able to repay the loan. Providing proof of income can give a lender more peace of mind and demonstrate that you’re financially capable of repaying the loan.

If you don’t have any proof of income and your credit score is still lower than you’d like, you can consider applying with a creditworthy co-signer. Ideally, this will be someone who has a good credit history and can vouch for you with your lender.

However, you should only use a co-signer if you’re certain you can repay the loan. If you default on a loan, the bank will go after your co-signer, which will put their financial future at risk.

How can you maintain your credit score once it’s fixed?

After taking the time and effort to raise your credit score, make sure you do everything in your power to keep it up — or get it even higher!

You might not be looking for another loan or line of credit at the moment, but you never know what your financial future will look like. Perhaps you rent an apartment now, but want to buy a house further down the road.

Getting a Mortgage

It’s hard to figure out how to get a mortgage with bad credit, so do your best to make sure you take care of your credit now. That means paying all your bills on time, setting aside cash for emergency savings, and not racking up unnecessary debt.

Remember, most infractions stay on your credit report for up to seven years, so the financial decisions you make now stick with you for a long time.

Renting an Apartment

Plus, think of all the ways poor credit affects your life outside of getting a loan. Many landlords run credit checks on prospective tenants, so it can be difficult to rent an apartment with bad credit.

Potential Employers

Potential employers also sometimes run credit checks on job applicants to see how they handle their money. Why? They think that if you’re not responsible in your personal life, you probably won’t be responsible in your work life.

So bad credit not only affects your spending power, it affects your earning potential as well. Keep every door open by making a conscious effort to continually improve your credit. It would be a huge waste of time and effort to give up on all the progress you just made. Do yourself a favor and consciously manage your money going forward.

Final Thoughts

It certainly is possible for people with bad credit to get a loan, but that doesn’t mean it’s the best decision for you. Analyze just how urgent your financial needs are. Then, decide if you can wait a while to improve your credit before taking out a high-interest loan.

A reputable credit repair service can help you aggressively put your credit score on the fast track to improvement. Check out our credit repair reviews page for a list of reputable credit repair companies that can get you started today.

Source: crediful.com

Forbearance of Foreclosure? How to Keep Your Credit and Homeownership Intact

The following is a guest post by Eric Lindeen, of Anna Buys Houses.

The second quarter of 2020 marked the highest U.S. mortgage delinquency rate (reported as 60-days past due) since 1979. Amidst the chaos of the pandemic, federal and state governments have made efforts to protect against the financial strain U.S. consumers are enduring—including mortgage payment forbearance of foreclosure. 

What Is a Forbearance?

Forbearance is the postponement of mortgage payments, or the lowering of monthly payments for a specified time period; it’s not loan forgiveness. Repayment terms are negotiated between the borrower and lender. Mortgage forbearance is one tool to help protect homeowners from foreclosure due to temporary hardships, such as a job loss, natural disaster, or pandemic. Some homeowners may opt for strategic forbearance, meaning they proactively enter a forbearance agreement just in case they lose their ability to make their mortgage payments.

As of October 25, data from the Mortgage Bankers Association (MBA) reports that approximately 2.9 million U.S. homeowners are currently in forbearance plans. That number represents 5.83% of servicers’ portfolio volume. MBA data also shows that nearly 25% of all homeowners in forbearance plans have continued to make their monthly payment (perhaps an indicator of the use of strategic forbearance).

How Do Forbearance Plans Work?

Mortgage payment forbearance programs have come at a time when many Americans are losing their livelihood and others fear the potential fallout from the health and economic crisis. Not all forbearance plans are created equal. Therefore, it’s critical to understand how different plans are structured to protect your financial health and credit. 

The Coronavirus Aid, Relief and Economic Security (CARES) Act is one measure enacted to provide relief to consumers facing hardships due to the impacts of the coronavirus. One provision of the Act allows mortgage payment forbearance and provides other protections for homeowners with federally or Government Sponsored Enterprise (GSE) backed or funded (FHA, VA, USDA, Fannie Mae, Freddie Mac) mortgage loans. 

If you have a federally or GSE-backed mortgage, no documentation is required to request forbearance, other than an assertion that you are facing a pandemic-related hardship. Borrowers are entitled to an initial forbearance period of up to 180 days. If necessary, an extension of an additional 180 days may be requested. Federally backed mortgages are protected against foreclosure through December 31, 2020. 

Recently, the foreclosure moratorium was extended yet  again to at least March 31, 2021 for GSE-backed loans (Fannie Mae and Freddie Mac). Be sure you understand who owns your loan and the terms of your loan as these deadlines approach. Extensions are likely to continue to help borrowers keep their homes and lenders navigate the constant uncertainty that is 2020.

The CARES Act amended the Fair Credit Reporting Act (FCRA) with a provision that when a lender agrees to forbear an account of a consumer impacted by the pandemic, the consumer complies with the terms of the forbearance. Then, the mortgage issuer must report that account as current to credit reporting agencies.

How Your Credit Factors into Forbearance

On paper, knowing that your credit won’t be affected by forbearance seems like a good deal. There’s an important distinction here. Your loan doesn’t need to be current to qualify for forbearance under the CARES Act. However, any delinquencies on your account prior to entering a forbearance plan will impact your credit report. Make sure that your loan is current, and being reported as current to the credit bureaus, before you agree to a forbearance of foreclosure.

What about Private Mortgages?

Around 30% of single-family mortgages are privately owned. Many private banks and loan servicers have voluntarily implemented relief measures that don’t fall under the same protections of the CARES Act. Terms vary by institution and state of residence. And relief plans may not be structured in the same manner as federally-backed and funded loans. 

For example, borrowers with private loans may be required to pay back all missed payments in a lump sum as soon as the forbearance period ends. Lump sum payments are not required for GSE-backed loans. Additionally, if modifications are made to a privately funded loan, the new terms could impact your credit score depending upon how the lender reports the status of your loan to the credit bureaus.

The good news is that the three major credit bureaus (i.e., Equifax, Experian, and TransUnion) are providing free weekly online credit reports through April 2021. Be sure to check these reports to ensure that the new terms of your loan are being reported as “paying as agreed” and not reported as late. Credit.com also has resources to help check and manage your credit.

It’s also important to understand the terms of your loan. Some homeowners who recently refinanced were asked to sign a form that was quickly described as “new COVID paperwork.” The fine print stated that their new loan was not eligible for forbearance relief measures. 

Get matched with a personal loan that’s right for you today.

Learn more

Mortgage payment forbearance is one tool that can protect homeowners from defaulting on their loan, damaging their credit, and worst of all, losing their home to foreclosure. Key takeaways include, knowing who owns your loan, who services your loan, and what type of protections are available to provide relief if the current economic crisis is impacting you or you fear that it might. 

There are proactive steps to protect against foreclosure and determine the right path for your personal situation.

Source: credit.com

Retail: Sales Jump in January on Stimulus Checks

Retail sales jumped 5.3% in January, as $600-per-person stimulus checks hit pocketbooks early in the month. All major categories of spending rose. The biggest beneficiaries: Department stores, up 23.5%; home furnishings, up 14.7%; electronics, up 12.0%; nonstore (mostly e-commerce), up 11.0%; sporting goods and hobbies, up 8.0%; and restaurants, up 6.9%.

More stimulus is expected: The current Democratic stimulus proposal includes an additional $1,400 per person, though with income restrictions. With COVID-19 infections dropping this month, sales should continue to be strong as restrictions are eased and more people feel comfortable shopping or eating out in-person. The recent winter storms should ding February sales in Texas and certain other states, however.

Restaurants finally caught a break in January, doing better than expected despite a continuing pandemic surge. Falling COVID-19 infection rates in February also bode well for restaurants, though likely not until after the current winter storms subside.

Even though November and December sales showed monthly declines, holiday sales were still above last year’s level. Holiday sales of in-store goods were 4.9% above last year, though only 3.0% higher if building-store sales are excluded. E-commerce sales were roughly 26% higher than last year. Of course, not all stores have done well. Clothing, electronics and department stores have a lot of ground to make up to get back to last year’s sales level.

Source: kiplinger.com

How Shaquille O’Neal Become a Real Estate Investor

Shaq became famous as a basketball player, a very large basketball player! He was 7-1 and was well over 300 pounds when he was playing in the NBA. Not only is he one of the best basketball players of all time but is a real estate investor as well. He has also been a major part of many other businesses like Ring doorbells, Five Guys Franchise, and he was an early investor in Google. After leaving the NBA, he has become even more involved in real estate and been a part of some very large deals! It is hard to find the exact information on what Shaq has done real estate-wise, but he has given hints over the years in interviews on how he started and what he is involved in. From what I could find out he started by flipping houses with a partner in New Jersey. He has also been involved in low-income housing in Denver and done deals in Florida as well. He currently is focusing on large projects in the New Jersey area where he spent time as a kid.

Where did Shaq live growing up?

Shaq was born in New Jersey and his father was a basketball player as well. However, his father had drug problems and was never a part of Shaq’s life. Shaq did have a stepfather who was in the army and Shaq ended up living in Texas and Germany as a kid because of his stepfather’s career. Shaq ended up going to high school in San Antonio and leading his team to a state championship. Shaq was a always big kid. He was 6-6 when he was 13! I was 6-1 when I was 13, but I stopped growing at 13 and Shaw did not.

It is important to know where Shaq grew up because it impacted his real estate investing later on. He was not a real estate investing just to make money. As he said on CNBC Make It:

I don’t invest in companies just to try and get the big hit,”  “I [invest] because I know it’s going to change people’s ideas… change people’s lives.”

How did Shaq blow his first million?

Shaq had an amazing interview with Daymond John (The Shark Tank) about how he spent a million dollars the first day he made it. He spent $150,000 on a Mercedes for himself, then his dad wanted a car so he bought him one, and then he bought his mom a $100,000 car. He bought jewelry, suits, CD changer, went to Vegas, etc. Then his banker called him in to warn him about his spending. Shaq had no idea about taxes and that he had spent the entire million without realizing it!

From that point on, he made sure to take care of his money and learn from those who know about money. He credits Magic Johnson with helping him learn a lot about money and investing it instead of wasting it.

How did Shaq start his real estate investing career?

During Shaquille O’Neal’s long playing career, he earned an estimated $292,198,327! He definitely had a head start as an investor by earning so much money in the NBA. However, he did not start with huge projects although some of the articles you read will have you believe he did. In a 2002 article from the Denver Post about an affordable housing project he said:

“We started buying homes out of foreclosure and paying $10,000 or $12,000 for them, fixing them up, and maybe selling them for $25,000 or $35,000,” Shaq said.”It would be easy for me to develop a housing community around a golf course or buy strip malls, but that’s not how I want my book to go.”

He was talking about Mike Parris, who was his uncle and business manager, and mentioned that he was doing this 4 years ago, which would have been 1998 when he was 26. Shaq started small in his hometown. At the time he would have been playing with the Orlando Magic in Florida.

While he may not have been the one swinging the hammer, he was definitely investing in real estate at a young age.

How did Shaq’s real estate investing evolve?

Shaq started the O’Neal group in 2006 which invests heavily in real estate, but as we know he was involved in investing before that. In the article in the Denver Post from earlier, he was also involved in buying big projects before that as well. In 2002 Shaq said;

“My dream is to own $1 billion a year in affordable housing,”

  • He started by purchasing a $65 million affordable housing project in the Denver area that eventually cost $100 million after property improvements and other costs were factored in. The project consisted of 1,500 units and the seller would only sell to investors who were willing to keep the affordable housing aspect of the project.
  • In 2006 his company invested in The Met in Miami which was a highrise with 1,000 units.
  • He also recently opened an $80 million apartment complex in New Jersey and has plans for another $150 million high rise.

What is a little frustrating is the giant gap you see from 2006 to 2018! it is hard to find much information on the O’Neal group or his real estate investments during that time. There was another project he was involved in Atlantic City, but I could not find out if that project was ever completed. However, he was not just investing in real estate during his career. He has done many things!

What other businesses has Shaq been a part of?

Shaq has said he loves real estate and obviously has been a part of some huge deals but he has done many other things as well! Here are a few of them:

  • Pre-IPO Google stock: He bought into Google before it even went public.
  • He started a clothing line
  • He has owned 17 Auntie Anne’s Pretzels restaurants
  • He has owned 150 car washes
  • He has owned 155 Five Guys Burgers and Fries franchises
  • He has owned 40 24 Hour Fitness gyms
  • He has been a partner in Las Vegas nightclubs
  • He has owned a movie theater
  • He was a partner with Muscle Milk
  • He was a partner with Vitaminwater
  • He was a partner with Loyal3
  • He has released albums with commercial success
  • He has been in movies and on TV
  • He is super involved with law enforcement

I am sure I am missing many other things he had done or been a part of! I have no idea how many of these things he has sold or still owns but he has sold many of his investments and business over the years. He is obviously very diversified!

How involved is Shaq in real estate investing?

I have no idea how involved Shaq is or was in real estate. He sounds very passionate about it when he talks about so he could be very involved. However, he has so many other things going on it would not surprise me if he is mostly the money guy and other people find the deals and put together the projects. There is nothing wrong with that as the best investors learn how to make money without doing a ton of work! If Shaq happens to read this and has some more information to add, I would love to hear from you! Mark @ Investfourmore.com

Source: investfourmore.com

Trade: Deficit Will Widen Only 1% in 2021

The trade deficit narrowed in December. The deficit in goods and services fell to a seasonally adjusted $66.6 billion from a revised $69 billion in November, a decline of 3.4%. But for 2020 as a whole, the trade deficit widened 17.7%, to $678.7 billion — the highest since 2008. The surge in household demand for imported goods following the onset of the pandemic was the main driving force of the larger gap. The trade balance is also weak because depressed global demand continues to hurt U.S. export growth.

A good portion of the widening in the trade deficit is likely to be temporary. Widespread vaccinations this year will result in a shift in household consumption away from goods toward services, and a gradual normalization of activity in the services sector. This would likely narrow the goods deficit, as households’ demand for imports would slow.

Pandemic-induced demand by U.S. households fueled imports, which rose 1.5% in December. Growth in imports was evenly balanced, as imported goods modestly outpaced services. Imports of goods were driven higher by inbound shipments of industrial supplies and capital goods. Services imports, by contrast, remain nearly 20% off their prepandemic level. Merchandise imports have been the quickest to recover and are nearly 4% ahead of their prepandemic level.

Exports rose 3.4% in December, with industrial supplies and automotive vehicles and parts notching the strongest gains. Services exports continued to struggle amid restrictions related to COVID-19. That has kept total exports well below their prepandemic level.

Travel exports will likely remain weak in the first half of the year. Demand for travel and transport services remains subdued because of travel restrictions across the world, triggered by the pandemic. These exports will be very slow to recover until vaccine distribution is in full swing.

China fell short of its goal to increase purchases of U.S. products last year. The Peterson Institute for International Economics estimates that China imported $100 billion in U.S. goods under the phase-one trade agreement in 2020, compared with the target of $173.1 billion. Nevertheless, exports of goods to China rose 17.1%, while imports from the country fell 3.6%. The increase in exports to China was led by products such as soybeans, crude oil, cotton and corn. All of these were covered by the phase-one agreement. The Biden administration is reviewing the previous administration’s trade policies, including whether to move ahead with the next phase of the trade agreement with China.

Sources: Department of Commerce, Trade Data

Source: kiplinger.com