 The credit crisis has hit global markets, and it has left a strong, bad impression.Banks and other lenders have apparently shriveled their lending capacity so drastically that a lot of individuals and small businesses are feeling very vulnerable in the current atmosphere of simply unattainable loans. But, as bad as the situation has got, there are still some avenues open for getting banks to lend to you during the credit crisis; you just need to take the rights steps and look in the right places. Here are a few ideas if you feel like you can't get a loan during the credit crunch, but need one: |
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Checking and Raising Your Credit Score
Any person looking for a loan, today or whenever, needs to know their credit score. This number represents your hope of getting a loan, and if it's low, your chances are low.
- Get a copy of your credit score (available free at FreeAnnualCreditReport), and look to see if there are any pending issues with previous lenders. If there are, take immediate action to remedy the situation.
- Ongoing litigation and unhonored debts will be your biggest impediment in getting a new loan. Contact your previous lenders and work to the quickest resolution possible; talk with the Loss Mitigation department if you have to settle overdue payments. Whatever it is, the lender you're currently courting will be more inclined to give you a loan if you have stepped up to the plate with past obligations.
- A good way to actually raise your credit score is by using dormant credit cards you may have and paying them off on schedule; the process of entering into debt and properly paying it back inspires confidence in lenders and boosts your credit rating.
- People with little credit history consequently have poor credit scores, much to their surprise, since they may frequently think “I've never had any loans to default on.” This inexperience does not inspire confidence in banks.
- Lastly, a good way to improve your overall credit rating is to bring your credit utilization ration to a good level, by bringing the balance you owe on your credit cards to roughly 30% or less; this shows you have good credit management skills.
For further information on raising your credit score, read "Things You Can do to Raise Your Credit Rating." |
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Talking to a Banker
Getting a loan may seem like such an impersonal affair, but if you can exploit the personal side of the process, managing to actually sit down with a banker that may be involved in the decision making process of whether or not you will get a loan, then you've at least got your foot farther in the door than most. If you have had credit problems in the past, discuss these with the banker and explain why it is that you had those issues. Maybe these situations apply to you:
- Perhaps there were perfectly good reasons for your past credit problems that were beyond your control, and that today you have overcome, with no chance of falling in the same misfortune again.
- Perhaps you were unemployed and today you have a great job with a great salary.
- Maybe you were sick and had medical bills coming out your eyes.
- Maybe you lost a loved on, had a divorce, or any other situation that can cost a large sum of money.
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| Whatever it is, stress the fact that you are past that point in your life and are on a better track now, or at least that you have better debt management skills than before (always assuming you actually do!). Just make sure that, if you have a legitimate, honorable, and understandable excuse, that it is heard: you don't want the bank to be thinking things about you that aren't true. |
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Find Alternative Sources for Loans
Finding a loan during the recession may prove to be difficult. Your very own bank may not end up loaning you any more money, and you may neet to start grazing in different pastures. Consider finding a program that looks for credit lines for people with your same credit rating profile, with interest rates you find acceptable, etc.
Some alterntiave sources of loans are:
- Credit Unions are a good alternative to traditional banks, and usually have better interest rates, so find out if you don't qualify for a credit union membership through work, a spouse, or a family member, if you're not already a member in one.
- Payday Loans are a good place for people with a job; in fact, payday loan providers usually don't go to the trouble of looking up all your credit history like banks and other lenders do, but merely want to know that you have a job and are likely to keep it.
- Micro-Loans are loans for businesses that are issued by a private person or group. Often the rates charged by a micro-lender are even better than what a bank would offer. Some popular micro-lending websites include Kiva, Prosper, and MicroPlace.
- Then, there are options for home owners, such as taking out a Mortgage Loan or a Home Equity Loan, though with today's real estate market being what it is, the liquidity on these loans has dropped significantly in recent months and years.
- Lastly, there is the possibility of taking a Loan out Against the Value of YourLlife Insurance, if you have life insurance; but the consequence of not paying back is that the lender will deduct the difference from the payout to the family members that survive you, which means that this option requires very delicate and diligent foresight.
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Compare and Don't Rush
When searching for a loan, it is always important to take your time and ensure that you take the best option available for your personal situation.
Here are some tips:
- Shop around for who's offering the best rates on the market, and who is willing to give you a reasonable loan.
- If you fill out forms, be conservative in what you are asking for, and be honest about the information you provide.
- Don't make the mistake of biting off more than you can chew, which is one of the surest ways to fall into the black hole of interminable debt problems.
- If you've been approved for a loan, don't bite at it if it's the first one; wait and see what else you get approved for, and choose your best option.
- Also, be careful about racking up loan denials, because they can hurt your credit score. If you notice that the first and second request get turned down, go back and look at ways of improving your credit score and getting more professional advice on where the best places for you to look are.
- Visit Bankrate.com to compare rates and loan types, and get a sense of what your possibilities are.
Remember, these credit crunch loans aren't going to fall into your lap, and you need to target a few likely opportunities instead of setting yourself up for predictable falls. |
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