A couple of the milestones of adulthood is purchasing your first home or a new car. However, both of these require a large amount of money and a loan. Even if you have money saved up, you will need to apply for a line of credit that is paid back over five to thirty years. The first step is to be working on your credit score by paying bills on time and keeping an active line of credit. What happens when you have little to no credit but need a loan quickly?
Prove Your Worth
When you talk to a financial institution about receiving money, they will want to know why you are worth the risk. They want to give money to people who have a stable income, do not move around much, and are reliable. These are displayed with good credit, but they can also be displayed with employment and rental past. The following documents can also help you show lending companies that you can repay:
Tax returns for the last two years
Resume or CV showing employment history and salary
Full list of assets
Most banks will also want to know if you have been involved in any lawsuits, declared bankruptcy, or faced eviction. Online lenders often require less information, and they are easier for people who have little to no credit to obtain a loan.
Traditional banks are pretty stingy on who qualifies for personal loans, but credit unions are willing to help those turned down by other financial institutions. They are banks run by the community to help the people of that city or metro area. The Gather Federal Credit Union would be an example of a local run credit union that would be more in tune with the communities needs versus a traditional bank. You can generally receive a loan based on merit and have the same interest rates that people with excellent credit receive, although you may want to look into the difference between a credit union vs bank to learn more about the specifics.
Borrowing from Family
If you have a good relationship with your family, consider setting up a loan with them. Create a contract of the amount borrowed and the repayment plan, even if there will be no interest. The same holds true if you borrow from a close friend instead of family. These documents are legally binding and will also assist in building your credit for future loans. Always contact an attorney specializing in creating financial documentation to ensure that both parties are represented, terms of repayment and consequences of defaulting are clear.
Obtaining a Co-Signer
Occasionally, the only way to obtain a loan of substantial value is to have a person who has good credit be willing to co-sign. While this sounds like a simple option, your friend or family member agrees to pay the total amount of the loan if you default. In addition, both credit reports are affected if payments are late or stop. However, with on-time payments every month, you will improve your credit rating and show the bank that you are worth future risk.
Finally, online lenders are a resource for fast, painless loans My Quick Loan | Instant Loans help people in a pinch with payday loans. Cash advancements are risky and often carry a higher interest rate. However, when paid on time, they will quickly improve your credit score. They have minimum requirements to qualify, such as steady housing and a source of income. These lenders are ideal when you need cash within 24 to 48 hours.