Want A Loan But Have Poor Credit History? What You Should And Should Not Do

For people with bad credit, it’s now harder to take out a loan. However, it’s not entirely impossible. Even with a less than stellar credit standing, it’s still possible for you to borrow money. Here are tips on what to do and not to do if you want a loan and have poor credit history:

Know your credit rating.
Although you may already have an idea that your have a ‘black mark’ on your credit rating, it is a good idea to get a copy of it for your reference. You can get a free copy from VedaAdvantage.com.au, it takes about 1 week to be posted to you.

Do not go asking for a loan without knowing what your financial status looks like. It’s irresponsible and makes your creditor see you as disorganized — a sign that you may not be a reliable borrower.

Do not go to a lender without any qualification.
Whether it’s a car loan, a mortgage or a personal loan, you should be able to show that you have a source of regular income and that you can be located at a real address. There are also certain documentations you need to show, so know what these are.

Know your available cash.
If you want a loan and have a poor credit history, lenders will likely look at how much available cash you have. With a low credit rating and in lieu of a collateral, you will generally need cash in order to compensate for a down payment, for example. If you have a cash reserve, you offer your lender better protection than if you don’t have any.

Offering cash is also an indication that you won’t default on your loan since you have already made a substantial investment.

Consider a non-conforming loan.
Not every person with a poor credit history may qualify for a conforming loan, so many turn to non-conforming loans to get the funds they need. A non-conforming loan allows you to take out a loan provided you hold a regular job and are capable of making regular payments. But what about your poor credit history? Your credit will still be a factor but it will only be used to calculate the interest rates and the ratio of your loan amount vs. the value of your home, which is also known as the LTV (Loan to Value).

Many lenders will willingly offer this loan to borrowers even if they are bankrupt or are risking foreclosure. To keep their risks minimal, lenders simply keep the LTV low. They could, for example, calculate the LTV at just 75% of your property’s appraised value, a move that affords the lender plenty of protection.

If you wish to read more about the rules to getting a home loan even with a poor credit history, grab this free report.