Guaranteed Finance for People with Bad Credit

Past, Present, Future

The truth is that many lenders are aware that people who currently have bad credit used to have good credit or even excellent credit and for unexpected situations their ability to obtain finance was heavily compromised. Past financial mistakes shouldn't determine once financial future as long as people learn from those mistakes and that's what more and more lenders are beginning to understand.

Secured or Unsecured Loans

There are many online lenders dealing with bad credit personal loans. This kind of loans can be secured or unsecured. Unsecured loans do not require collateral but often carry higher interest rates due to the high risk involved. Secured loans carry lower interest rates and require collateral. Thus, you should only request a secured loan if you are certain that you will be able to afford the monthly payments. Since the collateral guarantees the loan, you are risking the asset and the lender can claim his money by use of the legal action of repossession.

Uses and Benefits

The uses of bad credit personal loans are variable, ranging from going on vacations, buying a car, and most commonly debt consolidation. Specially when used for eliminating debt by paying off bills and credit card balances, Bad Credit Personal loans will contribute to raise your credit score and improve your credit history. The timely monthly payments will be recorded into your credit report, enhancing your credit situation till you can acquire a good credit tag.

Co-signer

A way to make sure a lender will approve your Bad Credit Personal Loan is applying with a cosigner, especially if he or she has a better credit score and history. This way, the lender will take into account the co-signer credit report when deciding whether to approve your loan or not. The risk involved for the lender will be significantly lower because the co-signer will also be responsible for paying the monthly installments if you fail to repay on time.

Interest Rates

Interest rates are usually higher when it comes to bad credit personal loans, however they are usually lower that credit card's interest rate, which makes them a better source of finance. Also, there are many options available out there, so don't settle for the first proposal and ponder what each lender has to offer you. Be aware that variable interest rate, though it is usually lower than fixed interest rate, can vary according to market conditions' changes and you may end up having to pay higher monthly installments if the market situation worsens significantly.

Online lenders

The wisest thing to do is to search online, there are many online lenders offering very reasonable interest rates and you'll be able to get quotes from them and compare rates and fees before making a decision.

Project Financing On Construction Loans?

Fortunately, most new construction loans also include project financing. There are construction loan programs nowadays that combine both the funds needed for the constructions and the ones needed for completing a residential construction project. You may wonder what are the different costs that these loans cover for and what information does the project need to include so as to guarantee its approval and the loan's disbursement.

Information Needed For Appraisal Of The Future Property

Since with this kind of loans you need to know the value of something that hasn't already been built as opposed to mortgage loans where the appraisal is easier because the property already exists, some information will have to be delivered to the appraiser and the lender so as to let them figure out what the final worth of the property will be.

Basically, in order to obtain a proper appraisal of the future property you'll need to provide information regarding what is going to be done and what materials are going to be used, how much the materials will cost, etc. Additional costs like the ones related to the contractor, plans and authorizations must also be included in order to provide an overall idea of the costs of the project.

Information Needed For The Loan Approval

As regards to the documentation needed for the approval of the loan, the issue is more complex. As with regular loans, you'll need to provide both income and credit documentation to prove you are trustworthy. Income documentation requirements may not fully apply on stated income construction loans but a credit check will always be run.

Also the lender will require a credit check on the contractor that will take on the construction project so as to make sure that the contractor is also trustworthy and that there will be no problems or delays on the construction. Most of the documentation requirements from the contractor will be then handled by the contractor and the lender without your intervention.

Loan Amount And Limitations On Stated Income

Depending on whether you can show proof of your income or not, you'll be able to obtain higher or lower loan amounts. The loan amount will also depend on the applicant's credit score and history among other factors. Stated income construction loans don't have limitations on the loan amount but on the loan to cost ratio thus requiring a reserve for the costs and contingencies of the project.

It is possible to obtain up to $2,000,000 or even more with some lenders but it will all depend on your credit report records and the feasibility of the project. The loan to cost ratio can reach up to 95% of the projected value of the property which implies at least a 5% reserve to cover for the rest of the costs of the project and any unexpected expenses.