How to Get a Home Loan with Bad Credit
One of the harsh truths of life is that most things you do have an equal and opposite reaction. And perhaps nowhere is this more significant than in the field of personal finance. If you have made late repayments, your credit takes a hit. If you default on a loan, your credit takes a hit. If you go bankrupt or a bank decides to foreclose your mortgage, you are in deep financial trouble.
The main problem with such negative incidents that result in bad credit is that even if your financial situation improves and becomes stable, banks will be reluctant to lend you money. As far as the lenders are concerned, once bitten twice shy. Lending money to you was a risk once and it could be the same again, at least for a certain number of years.
But this should not stop you from making solid financial plans that would help you get ahead in life. If you want to buy a home and feel that you have reached a stage wherein you will be able to take a loan and repay it on time, there are several things to consider.
Settle up Any Existing Debts
Before making any effort to secure a home loan, make sure you end any credit lines that are still active. This could be from your credit card or other loans you have taken. The best option at this point would be to close any existing credit card and get a better grip on your finances.
Remember, credit cards are useful to improve your credit score only when used wisely. Once you have more control over you finances and things get better, you can apply for a new credit card and start over again.
Explain Your Situation to Banks
A problem with banks is that things like credit-worthiness are often black-and-white issues for them. If you have a bad credit score or an unfavourable financial history, you would be considered ineligible for a fixed number of years. They are bothered neither about your reasons for defaults nor about what you have done to improve your situation.
The reason for this is that banks take loan-related decisions based on the Credit Bureau Singapore’s (CBS) report of you. This report is just a score that is calculated based on your financial history without going into the details of your situation.
But this does not mean that banks do not wish to lend you money. All said and done, loans are one of their products and for their business to survive, customers should purchase their products.
What you can do in such a situation is an attempt to explain the reasons behind your bad credit score and highlight the efforts you have made to become more stable. Things like loan defaults do not happen just because the borrower is financially irresponsible. Incidents that are beyond your control, like medical emergencies, can also impact your finances. If you have such a reasonable explanation, convey it to the bank. Make sure you support this with documents that prove your improved financial status.
Cash Deposits and Down Payments
Save up enough money to make a cash deposit or offer a large amount as down payment to get the banks interested. There are some banks that may agree to lend you money if you make a cash deposit.
Even when you have found a creditor who is willing to finance you, offer to put a significant percentage of it as down payment to lower the interest rates. This could mean that you wait for a while till you are able to save up the required amount but, on balance, this will work in your favour.
Apply with Someone Else
If your spouse, an eligible sibling, etc., has a decent credit score, you could try applying for a loan by getting them to become a co-signatory. In some cases, this should offset the effects of the negative score you have.
However, this is not a guaranteed solution to bad credit and banks may still decide to rule against you. But even if that happens, an option you can still consider is applying for the loan in the name of the person who would have been your co-signer.
If you have tried everything you possibly could and still find banks unrelenting, it is time to seek other sources of funds. Non-bank financial institutions tend to be a bit more lenient when it comes to assessing your reliability.
You may still have to settle up all your existing debts but would not have to worry too much about your bad credit history. However, the interest rates set by these institutions may be higher than those of banks. Remember to read the terms and conditions carefully before deciding to go with this option.
To sum up, even though getting a home loan when you have bad credit appears to be a herculean task, it is not impossible. Settle up all your debts and try to convince the bank of the progress you have made in terms of financial management. If that does not work, look for non-bank financial institutions.
Applying for a home loan means preparing your finances for a lender and keeping them ready. Here are 5 things all potential home buyers should never do once they have applied with a mortgage officer or lender.
There are different types of loans available for businesses. An unsecured business loan has proved to be the best option, thanks to the high loan amount and flexibility in repayment. The loan does not require any asset to be hypothecated and the entire risk remains on the lender.
Peer-to-peer lending is a type of debt financing wherein lenders and borrowers enjoy the control and freedom over the terms of a loan. There is no intervention of the intermediary financial systems. Simply, it is the term used for defining the practice of lending money by individuals with the help of services that connects the borrowers and the lenders directly.
We’ve all been there at some point, summer has rolled around and those savings we promised we’d make to help cover us over the summer months are non-existent. Now, you find yourself with no classes – and no money! Here four tips for surviving summer without your student loan.
As a business owner, you often face the requirement of funds. There could be a planned expansion or an emergency but the need for funds will have to be met. It is not feasible to always borrow from your friends and family time and again. This is why banks and financial institutions offer unsecured business loans that fit your diverse business requirements
Just lost the job that you really loved? You must be in denial and feeling stressed, but you need to tackle them in order to make a good move.
You may have heard that it is not easy to get approval for a car loan if you have poor credit. This comes as a shock to those who are wishing to purchase the car of their dreams but have a credit history which does not allow them to do so. To all those people who have their hopes hanging by a thread, here is how you can get approved even with bad credit history.