Low Interest Personal Loans – Possible?

Personal loans are nearly universally expected to carry terrible interest rates and ludicrous fees because people almost always think of them as payday loans. But that’s not completely accurate. You can also think about personal loans as signature loans, and those can very often be had at low interest rates.

So let’s talk about what it would take to lock up low interest personal loans. What’s the most predictable qualification for a low interest rate on any loan, personal or otherwise? That’s right, it’s a good credit score. If you want a bank to hand over a chunk of money with based on nothing but a signature and a handshake, it will only be because they can look at your credit history and see that it’s basically immaculate. I’m talking about a 700+ fico score. If you don’t have that taken care of, don’t expect to qualify for a personal loan with low interest.

But it doesn’t end there. The bank wants you to have a good credit score, but there’s something else they want you not to have, which is too much debt. Part of their analysis of you as a borrower is going to be to look at all the monthly payments you’re responsible for and then add the minimum payment that will come with the loan they’re about to give you. If that minimum payment will push you past a certain monthly payment load, no loan for you. I’m actually very glad that lenders have this practice. I know they only do it to protect their bottom line, but it also protects your bottom…line.  Working hard for your money and then watching it all flow right back out due to your high monthly debt service is a recipe for burnout and stress. You don’t need that headache.

So I guess part of the low rate personal loan equation is either not having much other debt, or having an income so high that your monthly debt isn’t a big factor. But I’m guessing that’s not the case with most people looking for some short term financing.

In any case, take good care of your finances. If you can’t get low rate short term loans now, work at it and the day will come. Of course, when that day comes you may not (hopefully) need them anymore.

Credit Cards for Bad Credit to Help you Get Started or Rebuild

Let’s take a close look at credit cards for bad credit, because if you sign up for the very first one offered to you I think you’ll probably end up regretting your decision (because you’re going to be paying fees and interest rates that might not have been there with another card). Of course when it comes to choosing a credit card you’re always looking at a few standard criteria, such as annual fee, credit limit, deposit required (if it’s a secured or prepaid card), APR on purchases, cash advance APR, balance transfer offers, and of course the all-important rewards programs.

Not all of those factors are going to come into play with credit cards for people with bad credit. For example, these kinds of cards aren’t typically going to have rewards programs or special offers on balance transfers. These cards are geared more toward people who’ve either really messed up their credit or are just trying to get their foot in the door of the credit world.

The big distinguishing characteristics of this type of card are the fees, the deposit required, and the purchase APR.

You’re likely to see many of these cards start with a 9.9% APR on purchases, which isn’t terrible. If you have some kind of credit, albeit damaged, you can probably get a minimum credit limit of around $250 without a deposit, but the fees are where they’ll get you.

I checked out three different Mastercards for bad credit, and the fee structure just blows my mind. Let me summarize their fee disclosure paragraph from the offer (small amount of sarcasm included):

“If we happen to qualify y0u for a credit card, we’re going to take all our fees for the first year up front. This includes an account set-up fee of $29, a program fee (huh?) of $95, and on top of that we’re sticking you with an annual additional fee of $48. But wait…there’s more! We’re also going to charge you $7 per month for ‘participation.’ All of these charges will be on your first statement, and your available credit will be whatever happens to be left over when we’re done with you. If your credit limit is $250, you’ll be left with the grand sum of $71 available on your card.”

Kind of hilarious right? But let’s keep this in perspective. Credit card providers have to make money, and as a no credit or bad credit applicant you pose a big risk. They’re giving you credit and immediately getting monthly payments from as a way of protecting their bottom line. This is the cost of establishing, or rebuilding, your credit score. If you’re smart you only have to ‘pay to play’ once. After this initiation into the world of credit you’ll have your shiny new fico score to get you low fees and interest rates on anything you borrow.

Finding a No Credit Check Credit Card

Part of becoming an adult is establishing your credit. As much as we’d all love never having to borrow money for anything we need, that’s just not realistic. If you want to own a home or a car, you probably have to have credit (well, I supposed you don’t have to borrow for cars, but most people aren’t willing to save enough to buy the car they want, and they’re not willing to drive the car they could actually pay cash for). So you’re going to need some credit, which means you need to use the right tools to help you start building your credibility as a borrower. A no credit check credit card is going to be one of those tools.

Let’s be clear about what credit cards with no credit check are. They’re not high limit cards; they’re very low limit. They’re not fee free cards, they almost always come with fees. And they’re usually not unsecured cards; they’re usually prepaid or secured. So, you’re going to be paying for this credit building tool, and it’s not going to be glamorous. We’re not talking about an Amex Black card you see the rich folks and the celebrities walking around with.

Essentially what’s happening here is the credit card provider is saying “you have no experience with credit, and there’s no proof or even evidence that lending to you is a good idea. We’ll give you a card that allows you to borrow up to the amount you keep on deposit with us, and then we’ll watch how you use it. If you’re smart about it we’ll start to bump up your privileges with the card and eventually allow you to use the card beyond the amount of your security deposit.”

This is one of the real ironies of building up your credit with a no credit credit card. The more effectively you do it, the more easy it becomes to bury yourself in credit card debt. Don’t make that mistake. I personally don’t think it’s a bad idea to have a couple of credit cards with high limits, but you want them there strictly for emergencies. There’s no reason at all to get in the habit of actually using these cards or carrying a balance.

So yes, you need credit, and getting credit cards with no credit can help you make your name with the credit agencies. You really just need to be so careful about how you do it because credit can either be your best friend or your absolute worst enemy, and you get to decide which.

Payday Loans for Bad Credit: Do they help you or hurt you?

When I think about any bad credit loan, it only makes sense to me that it should serve some purpose beyond just adding to your monthly payments. In my mind, a loan should pass this test before you ever sign your name and spend the money:

Is the loan absolutely necessary? What are you going to use the money for? I’d say there are good reasons to borrow money and a lot more bad reasons.

Good reasons: finance a new vehicle (when your old one is no longer worth repairing), finance a home (that fits in your budget), finance your education (because this increases your earning power).

Bad reasons: finance a new car that you don’t need, finance a home you can’t afford, finance auto repairs that should have been covered by an emergency fund you keep in your savings account, finance lunch, finance home electronics, etc etc.

So when it comes to payday loans for bad credit, I’m wondering which of the good reasons for debt would be satisfied? After all, with a payday loan you’re really only getting a few hundred bucks, so what good use can it possibly be put to?

Yes, I realize that most people are using a bad credit payday loan for things like the above-mentioned emergency auto repairs, maybe emergency dental work, school supplies for the kids, etc. But I still say that’s extremely dangerous, no matter how necessary the expense seems to be in the moment. The real danger of using this type of financing in your life is that it it sets a very dangerous precedent. Once you’ve used a payday loan, your brain tells you “that wasn’t so bad” and three weeks later you find yourself in the same corner loan store borrowing another $250 or whatever.

I’ve often wished I could be a fly on the wall in one of these shops just to see how many of the customers are repeat offenders. My instinct and my concern is that it would be a majority.

So if you have no other recourse, and the lights are going to be turned off, or you’re going to lose your job, or some other legitimate emergency comes up that requires you to use a payday loan with bad credit, then I suppose you’ll have to. But promise yourself it’s a one-time occurrence. Take better care of your money, set a little aside for emergencies, and you won’t have to borrow this way anymore.

Bad Credit Car Loans

The worst case credit scenario for all of us is bankruptcy. I read an article by a bankruptcy attorney once that people’s biggest fear when they’re deciding whether to go through bankruptcy is that they’ll never be able to own a home again and they’ll never be able to buy another car. Those fears aren’t really justified, but it’s true that borrowing for cars and houses is going to get much tougher after you’ve gone through the big BK. Elsewhere on this site we’ve talked about getting a mortgage when your credit is bad, but let’s talk about bad credit car loans.

Surprisingly, working with an actual new car dealership might be the way to go when you’re trying to get a car loan with bad credit. You’d think the opposite right? Especially when you drive by those little used car lots and they have the big banners (next to the giant inflatable gorilla) that say “No one will be denied! Everyone approved!” But new car dealerships know that a very high percentage of the people who walk onto their showroom floor have messed up their credit in some way and will need some creative financing.

If you want to save yourself having to drive to the dealership only to find out they don’t want to play ball, call ahead. Ask to talk to the financing department, and if you can get the finance manager on the line ask him or her what kind of bad credit financing options could be available to you. If they say they don’t have anything to offer, move on to the next.

I’d be surprised if that’s the case, though. I’ve heard of plenty of places that are willing to set up some kind of short term lease that they’ll convert to a permanent loan at a lower rate after you’ve made payments for a couple of years. It’s going to be more expensive that way, but you ought to expect that, given your credit status.

You also might be surprised to hear that credit unions very often have great bad credit new car loans. Call around to the credit unions in your area, explaining your situation. If they’re smart, they’ll walk you through kind of a verbal prequalification process on the phone (what’s wrong with your credit, how much do you make, how much are your other monthly debt payments, etc) and then they’ll let you know what programs are available to you.

Yes, the interest rate is going to be pretty ugly compared to what a good credit borrower would get, but who cares? This loan gets you the car you need and it helps you rebuild your credit. If you have to pay 8% to 10% interest so be it. Learn the lesson, make your payments, and enjoy your new car.

Bad Credit Business Loans

I’ve heard plenty of people say the biggest mistake you could make in starting a business is to go in under funded, and I’d have to say I agree with the sentiment. Most new entrepreneurs’ biggest fear is to start a business and have it go poorly. What they don’t realize is that in many businesses, success (in the form of sales) can be just as dangerous to the business as failure if there isn’t enough cash in the bank. Loans are a great way to get that cash in the bank, but if your credit is no good your only option may be bad credit business loans.

Take for example a manufacturing business. Let’s say the business produces some kind of trailers, and it’s just gotten off the ground. Suddenly, orders start poring in. Great, right? Not necessarily. If the business doesn’t have enough cash to keep up with demand, you’ll quickly upset the customers, harpoon your momentum, and then you’re left standing with what could have been a great business. Your only chance would be to get a business loan with bad credit to float you until your sales receipts put enough money in the bank to keep up with demand.

Now, the good news is you’ll find it easier to get a loan from a bank, independent of your credit status, if you already have a functioning business with some history of sales. Bankers’ wallets start to loosen up drastically once they can see an income statement that has any ink on it at all (turns out bankers are rarely interest in pretending to be venture capitalists).

If yo haven’t started making sales yet, getting a bad credit business loan will be just this side of impossible. I hate to say it so bluntly, but banks don’t like risk, and there aren’t many things more risky than a new business being run by an entrepreneur who doesn’t have a clear sense of what his costs are, or what his cash flow is likely to look like on a consistent basis.

So, if you have bad credit, but a good business idea, I’d start talking to every friend and family with some liquidity and an entrepreneurial spirit. I know no one wants to be ‘that guy,’ but if you really believe in your business you have to be ready to go through some awkward social moments to get the thing off the ground and steaming toward its potential.

Hang in there – if your idea is truly sound the money you need will find it’s way to you!

Getting the Best Student Loan Consolidation

More than likely you’re going to be dealing with your student loans for the next 10 to 20 years, so you want to make sure you get absolutely the best student loan consolidation plan possible. Unlike other types of debt, almost everyone consolidates their student loans, and it’s really profitable for lenders. Those factors add up to the reality that you’re going to get a good deal if you just know what you want and what to look for.

Step A1 before you even talk to any consolidation companies is to decide what your priorities are when it comes to consolidating and paying off your student loans. You might not have realized this before, but depending on your priorities you can either go for a really low interest rate via your consolidation, or you can go for an actual reduction in the principle you owe.

So how does that work? If your goal is to pay your loans off over a longer period (like 15 to 20 years) then it’s probably wiser to go the traditional route and just go for the lowest possible interest rate.

On the other hand, you might be one of those high achieving people who landed a sweet six-figure salary out of school and you’re looking to pay off your loan as fast as possible. If that’s the case you can actually ask for a reduction in balance as part of the consolidation process. The lender will be willing to lower your principle amount because a) they’re going to keep you at a higher rate, and b) they’re going to get their money from you more quickly because your repayment period will be shorter.

Either situation can be a win-win for you and the lender, you just need to go in with a good understanding of your priorities.

One note of caution: whether you take the lower interest rate or the lower principle amount you want to make sure those benefits are completely permanent! You don’t want to get five years into your repayment plan and then have them stick you with an inflated rate!

Here are a few of the benefits that will come with any student loan consolidation program (because they’re guaranteed by law):

• No penalties at all if you’re wise enough to pay your loans off early.
• No credit check whatsoever (talk about a bonus!).
• No upfront fees (good luck finding that with any other kind of loan consolidation – yeah right).
• Unchanging interest rates. Once you’re locked in, you’re locked in.
• An automatic reduction in your interest rate of .6% if you consolidate within your six month grace period after leaving school.

One benefit you should really look for with your student loan consolidation plan is a discount given when you set your monthly payments up on automatic withdrawal. It’s good for the bank because they don’t have to chase you for payments. And it’s good for you because you make your payment on time, every time, without having to think about it!

Bad Credit Mobile Home Loans

You know, some people would say that you’re just about as low as you can get if you’re looking for bad credit mobile home loans – but they’d be wrong. My husband and I went through a period early in our marriage where we were both unemployed, and we got a couple of payments behind on our single family home. Soon we realized that we were in over our heads with that house, so we sold it (luckily real estate was still in good shape at the time).

Unfortunately, our credit was now fairly severely damaged, so renting was our only option for the time being. For the next two years we went to work on two things: saving money for a down payment on another home, and repairing our credit as best we could. We were a little discouraged, but we knew if we persevered we’d be able to get back into our own place at some time in the future.

After two years we had done a pretty good job improving our credit (both of us were around 600 Fico scores), and we’d saved about $20,000 for a down payment on a new home). Only one problem – $20,000 wasn’t going to be a big enough down payment on most homes, and 600 Fico scores still made most lenders wary of us. We soon realized that looking for a mobile home might be the answer, and we hoped to find a mobile home loan for bad credit that would let us get back into the world of home ownership.

As a sidenote, you should realize that mobile home doesn’t always mean ‘trailer.’ There really are some beautiful mobile homes out there – I should know…I live in one – and it’s just a question of finding the right community to put your home in.

So my husband and I started to shop for the right mobile home and the right place to put it, and we found one that was just $74,000, in a brand new mobile home community in a nice part of our town. We were thrilled.

As we began the loan application process, we got even more excited. We found out that the combination of our moderately improved credit scores along with our down payment was going to make it fairly simple to get the loan we needed. The interest rate would end up being around 10%, which is pretty high, but we didn’t mind because we knew that we were going to be buying our own place.

We also knew that the credit agencies really love to see regular payments made on a mortgage of any sort – nothing will boost your credit faster.

So for us, a mobile home was the solution to some real challenges in our financial life, and we couldn’t have bought it without a mobile home loan for bad credit.