In a perfect world, you can pay off your debts in good time. You have a fantastic relationship with financial institutions that approve your loans every time you request one.
However, the reality is entirely different. Many people fall behind in paying debts as early as the first year after graduating. Some get jobs that cannot meet all their needs while others struggle to get a job in the first place.
It is estimated that more than half of the students fall behind in paying debts in the second year after graduation. The result of this is bad credit at a very early age.
Bad credit happens when you are unable to settle your debts in time or when you have declared bankruptcy at one point in your life.
Regular financial institutions shun people with bad credit like a plague. Your loan request has almost zero chances of being approved. It is the reason bad credit loans institutions exist.
You, however, still need capital if you are to get your dream business off the ground. How do you do that if no financial institution loans you money?
Here are five alternatives loan sources for people with bad credit:
1. Friends and Family
Your friends and family want you to win; they root for you more than any person in this world. Approaching them for a loan that will be able to support your business or clear debt is a viable option.
They will not give you stringent conditions to meet and will not charge an unreasonable interest on the loan.
Nevertheless, it is paramount to repay in good time to avoid souring of a relationship. Treat this loan as you would one from a financial institution.
Bad credit on your part does not have to mean you cannot get a loan from a regular financial institution. You still may be able to get the loan if you get someone with good credit to co-sign the agreement.
The financial institution will use the credit score of the co-signer to decide if you qualify for the loan but the co-signer will be as liable as you for the repayment of the loan.
3. Credit Union
Credit unions are non-profit organizations where their members can borrow loans. Credit unions were popular in the traditional days, and they existed to serve the community around them.
These unions look beyond your bad credit. In most instances, they find out about your character and reputation among the community. If both are good, then you have an excellent chance of getting the loan.
The best thing about credit unions is that they have an interest cap even for people who have bad credit.
4. Online Lenders
Technology has made the impossible possible. Some lenders only exist online. They exist as virtual financial institutions.
These institutions do not follow up on your credit history. You get a loan based on your ability to be able to create a remarkable online profile of your dream business.
5. Peer-to-Peer Lending
This is also an online system that involved getting a loan from an individual or a group of individuals.
Just like the online lender, you create an online listing. Investors will then choose if they want to fund your business based on the viability of the company you listed.
In conclusion, having bad credit does not mean abandoning your goals. You can still build that business that will change the landscape, and in the process rebuild your credit score.