According to American Debt Statistics, the average American has roughly $38,000 of debt, excluding mortgages. Too often, having too much debt can impact your credit score negatively if you fail to make payments on time. This, in turn, affects your chances of getting approved for a loan in the future. If you have a not-so-perfect credit score, you might be wondering if you can get a loan with bad credit and debt. Here’s what you need to know.
Approach Alternative Lenders
The truth is it can be difficult to get approved for a loan when you have bad credit and debt. Most banks and traditional financial institutions do not offer bad credit loans. The good news is there are alternative lenders that do. Most alternative lenders are flexible because they consider other factors besides your credit before deciding whether to approve your application. The process also involves less paperwork, and you can get the funds faster once approved. This is the case with hard money loans.
Opt for a Secured Loan
A security money loan is usually the best bet for borrowers with bad credit. That’s because when you offer your asset as security or collateral for the loan, this reduces the lender’s risk. Generally, bad credit loans carry a higher risk for the lender, so offering collateral helps protect the lender from financial loss. This makes them more willing to approve your loan and explains why a hard money loan is easier to get approved for. The house or property you’re purchasing is also used as security for the loan.
Make a Bigger Down Payment
Most bad credit loans come with a higher than average interest rate. Again, this helps to reduce the lender’s risk. However, you should consider making a bigger down payment both to lower the lender’s risk and to increase your chances of getting approved. The bigger your down payment, the less you have to borrow. This makes the loan easier to pay back. Be sure to make your loan payments on time, as this will boost your credit score over time.
In conclusion, it’s possible to get a loan with bad credit debt. This is especially so if you’re in the market for a hard money loan to purchase real estate. Get in touch with us today to find out how a hard money loan can benefit you even if your credit needs some repair.