Those lean times when you forget to pay the credit card bill may not have seemed like a big deal, but to banks, they’re a warning sign. If you’ve got a bad credit history, your odds of securing a loan with a major financial institute are low.
That does not mean you cannot get the cash you need. Secondary lending products such as car title loans exist for people whose credit is tarnished but showing signs of improvement. However, prior to exploring these options, ask yourself these questions
Do you have any collateral? Most secondary lenders like title loan company’s will not loan you any money unless you have a clear title on your vehicle to guarantee they are going to get their money back in one form or another.
Also, do you have income to pay the loan back? The greater your income, and the lower the payment, the better. If you don’t have much money left over at the end of the month to pay on your loan, most will not do the loan for you.
Finance company’s can also be an option for consumers with bad credit, but they have a few disadvantages. For starters, expect to pay a much higher interest rate, in many cases as much as two or three times higher than a primary lender such as a bank. With a finance company, chances are you may have to agree to a prepayment penalty. A prepayment penalty is a penalty charged for having paid your loan off early. With a prepayment penalty, you still have to pay at least a portion of the interest the finance company would have collected over the life of the loan.
Never borrow from family, friends, employers, or co-workers if you can help it. It usually turns out bad for both parties involved. For the lender, it is their place to take these risks, and the losses sometimes associated with it, but if you were to run into an unexpected problem paying a close acquaintance, you risk destroying that personal relationship, and alienating someone close to you.
Persistence pays when searching for any high-risk loan. As long as you are able to show a good debt to income ratio, and have some sort of collateral such as a clear car title, you most likely will be able to get a loan.