There are thousands, perhaps millions, of people out there that have no or poor credit. They feel that the cards are stacked against them, and they will never be able to get a loan. This couldnt be further from the truth. In fact, getting a loan with no or low credit is actually pretty simple: the caveat is that you will end up paying more for your loan. Here is the easiest way to get a loan when you dont have the credit required by the lender.
Put More Down
Suppose you want to buy a car that costs $12,000. You go in and try to put $2,000 down on the car, and finance the remaining $10,000. If you dont have a credit score of over 640, you will likely be turned down. Dont think that these are automatic denials. There are exceptions to every rule, and if you can swing it, put more money down. Bump your down payment up to $4,000 and see what the lender has to say.
Low credit scores mean that you are more likely to default on your loan. Lenders dont want to take on as much risk for those with poor credit, so they like it when you put more money down. If you do happen to default, and they need to recover their losses, it is much easier to sell a $12,000 repossessed vehicle for $8,000 than it is for $10,000.
Pay Higher Interest
If your credit isnt terrible, but its still far from good, you may be able to get a loan by paying a higher interest rate. On a large loan that can make a world of a difference. There are ways to get around paying a higher rate though.
Suppose you get your loan and you have to pay 1% over the prime rate. You suck it up and pay the extra for about a year. You then refinance that loan to a lower rate because you have made timely payments for the past 12 months and you have built up your credit score.
Build up Your Credit Score
A credit score is a constantly changing thing. The good news is that it isnt that hard to build it up. Going from no credit to good credit can happen within a matter of a year or two, and here are the best ways to get there.
Open a credit card. To build your credit score, you need to prove you can handle yourself when you have access to credit. To do so you might need to go into your bank and open a secured credit card. What this does for you is you put $200-$500 into a CD or a secured savings at the bank. Your card then has a limit equal to what you put into the savings. For the next year or two charge $5 to $20 every month, and pay it off as soon as you get your bill. The timely payments will build your score. Dont charge more than half your limit though.
Raise your cards limit. If you have a credit card already, you might be able to raise the limit on that card to build your score. One of the ways your credit score is calculated is by looking at your total access to credit, versus how much you used. So if you have access to $1,000 and you charge $990 each month, you use 99% of your credit and are a higher risk. If you raise your cards limit to $5,000 and still only charge $990, then you are now only using less than 20% of your limit and you pose less of a risk.
Getting a loan with no credit or poor credit can be tough, but there are lenders out there. Instead of fretting and worrying, try to get your loan. If it doesnt go through this time, then spend 12 months building your credit and try again. You may be surprised at how quickly your score will go up when you are smart about managing your money.