Having a bad credit will make a high-risk client to almost all financial institutions such as banks, credit unions, and other top lending institutions. This is because the creditors have strict regulations as they rely on credit rating when approving loan requests. Unless you assure your lender that you will pay back the loan, they will never approve your loan request.
Make sure you compare lender rates before choosing your preferred lender. Therefore, when you have poor credit, you will need to consider payday lenders and other sources of financial help. This is the sources that will provide you with the business financing without asking for credit rating.
Three Things You Can Do to Take Action with Having No Credit
A credit union, family and friends and home equity loans are the top 3 lenders you can approach if you have poor or no credit. Failing to pay your previous loan is one of the things that can have a negative impact on your credit rating. This makes it hard to obtain a business funding from a bank. However, you do not have to panic if you find yourself in this situation. This is because you can easily obtain a loan even if you have a bad credit or no credit from other lending alternatives available. Here are some of the top 3 lenders you must consider.
- Credit union
- Loan from family and friends
- Tap Your Home Equity
This is a financial lending institution that is similar to a commercial bank regarding the service offered. The only difference is that they are owned and run by their members instead of profit-seeking stakeholders.
Since these credit unions are non-profit organizations, they transfer the profit earned to its members inform of lower charges and lending costs, improved customer support.
The majority of credit unions will be willing to give you a business finding without checking whether you have poor credit. They will decide whether they will approve your loan based on your character and your promise to pay back the loan amount. If you want to obtain a personal loan from a credit union, make sure to look for the one that has something in common. Credit unions offer the best rates when you try to compare lender rates of other creditors.
Ask for Family and Friends
In most cases, those people who are close to might turn out to be your best source of business lending of you have a poor credit score. A family loan is meant to benefit every person involved. Make sure you treat any debt from your family member just as if it was part of an important business deal between you and your bank. This implies that the loan must be formalized with clear paperwork and lawfully documented. So that you can avoid future misunderstanding with the people close to you, craft a written contract that comprises the terms and conditions of the loan and rate of interest. On top of that, state what will happen just in case you fail to pay back the loan.
Find a Co-signer
If it is impossible to acquire a business funding from a friend or relative, you can talk to someone with good credit rating. The person should trust your capability to repay the loan. You can request the individual to be a guarantor on a personal loan from a traditional bank. Once you go with a qualified guarantor, the lending company will set the loan regulation based on the credit rating of the individual with good credit rating.Note that your co-signer will be responsible for the loan repayment. This means that if you default, or make late payments, you will ruin the credit rating of your guarantor. Nevertheless, if you manage to pay the loan as required, you will improve your credit score, making it easier to get a loan in future without the help of a co-signer.
Tap Your Home Equity
You can apply for home equity loan if you have equity in your home. A home equity can be defined as the difference between the value of your house and your mortgage. In this case, your house will be used as security and this type of loans can be acquired irrespective of your credit rating. The loan providers will ask for low-interest rate since the loan is secured by the house.