loans and credit

Bad credit personal loans are available when other options aren’t: even if your credit isn’t great, you can still get a loan to help in times of need. It’s important to remember that even though your credit may not be where you want it to be, by being sensible and shopping around you may be able to find relief, and a loan that could put you on the path to better credit. This doesn’t mean that you should settle for a bad personal loan though, because there are decent options out there. Here are some things to consider before taking out a loan:

Bad Credit Loans Aren’t All the Same. Just like any loan, a lot depends on how much legwork you put into finding the best deal. It’s a good idea to get quotes from banks, credit unions, small lenders and such, but don’t overlook the power of the Internet when it comes to being able to perform a broad search for the very best rates available. Even if it isn’t a cheap personal loan, it is still important to ensure that the deal you are getting is the best available for your situation.

Accurate Credit Report. Some folks incorrectly assume that their report is accurate without ever getting a copy to see that it is. Knowing that what is in your report is correct and up to date is important, and you can get a free copy once a year, so why wouldn’t you? If you do see something that doesn’t look right, notify all concerned parties immediately.

Make the Loan Work For You. What is meant by this is to make sure that you are taking the loan out for a sensible reason, whether that be debt consolidation, home improvements, education, etc. When you take a loan for a good reason you will likely realize some long term benefits, often above and beyond credit repair which results from being a responsible borrower. An example would be the increased value of your home after making improvements.

Lenders want to lend people money, even when they consider them high risk personal loans. What they like to see is some stability in your job history, that you typically pay your bills on time, have avoided taking out too many credit cards, etc. You should also hold off on closing the accounts for cards that you may already have, as this can negatively impact your credit rating as far as what percentage of available credit you appear to be using. Take some time to research and shop for lenders, and you should be in a better position to make the right decision.

Personal loans can come from a variety of sources, but one popular source for personal loans is a retirement account. It makes sense. It’s money you’ve been socking away to pay for your lifestyle to live out your golden years, but if you’re young and need money now, your golden years may feel far enough away to tap into your retirement funds now. Of course, there are advantages and disadvantages to taking out personal loans against your retirement account, but in a pinch it may be a better option than running up your high-interest consumer credit cards.

Personal Loans from a Retirement Account

Before you start dipping into your retirement savings, step back and determine how much money you need to borrow. Since retirement accounts, such as 401(k) plans, typically have a personal loans provision, it is possible to borrow the money but there are strings attached. For this reason, you only want to borrow the amount you need. In other words, don’t get greedy. After you know how much you need, go to the human resources department of your company or contact the investment advisor who manages the account. Keep in mind, too, that if you quit the job or get fired from the job that holds your 401(k) plan, you have to pay back personal loans within 60 days or the IRS charges you early withdrawal penalties and income tax. If you’re borrowing from a traditional or Roth IRA account for your personal loans, you have to pay income tax, depending on whether you are withdrawing contributions or earnings.

The human resources department or financial advisor can provide you with the forms you need to complete and submit in order to obtain the money from personal loans. Once the money is available, you can sign for the loan and receive the money. Keep in mind that if you have a spouse, your spouse most likely has to sign the paperwork as well. Generally, you can obtain personal loans from a retirement account within seven to ten days.

Tips and Warnings

Most retirement accounts have a minimum loan amount of $500, with a maximum of $50,000. If your employer matches funds for retirement, these funds are typically not available for personal loans. The term for personal loans from retirement accounts tends to be for five years or less, paying equal monthly payments until the loan is paid in full. Typically, interest rates are one percent above the prime rate. Similar to other types of personal loans, loans from retirement accounts usually have origination fees and annual maintenance fees to obtain the personal loans.

Consumers may be turning to debt relief services in greater numbers if a recent survey by Citi is to be believed. According to the survey, 62 percent of U.S. residents believe that the economy has not yet hit bottom. And consumers are getting more pessimistic as time marches on. Back in March, Citi took a similar survey. At that time, 59 percent of consumers said that they believed that the economy had still not hit bottom. These consumers might be looking at their own debt levels and forecasting future problems for themselves. After all, with the national unemployment still hovering near 10 percent, a large number of consumers are either out of work or seeing their annual incomes fall. These consumers have understandably increased their credit card debt. And when that happens, rough financial times and debt consolidation help usually isn’t too far off.

Consolidating Debt
Many consumers today are in need of debt consolidation advice. They’re receiving calls from collection agencies. They’re missing credit card and other loan payments. Their credit scores are plummeting. For them, bad credit debt consolidation might be an only option for debt relief. It’s true that debt consolidation isn’t exactly a “Get Out of Jail Free” card. It comes with some serious consequences: For one thing, consumers will see their credit scores fall if they work with a debt consolidation company. They’ll also end up paying sometimes high interest rates for their debt consolidation loan. But for many consumers, these negatives will be worth it to erase the stress of spiraling debt levels.

Unsurprising Numbers
The numbers in the Citi survey aren’t surprising. Most consumers remain glum about the performance of the national economy. Even though the Great Recession is officially over, and the U.S. economy started growing again in the third quarter of 2009, many consumers still feel as if the country is suffering through a financial slump. This won’t change until unemployment falls to more normal levels. It’s little surprise, then, that 62 percent of individuals reported that it will take at least two to three more years for their own households’ financial situations to stabilize.

Looking Toward the Future
For many of these individuals who are looking toward better times in the future, debt relief remains a priority. That’s why it shouldn’t be surprising, either, to see a boost in business for companies that provide debt consolidation help. The Great Recession hasn’t been good to too many businesses in the United States. Companies that provide debt relief, though, rank as one of the few exceptions to this rule.

If you think running up debt on your credit cards won’t affect your ability to one day find a job, think again. That’s because a growing number of employers check the credit histories of would-be hires. If those histories turn up a low three-digit credit score, the employers might move on to the next candidate, even if you are perfectly qualified for the job. Running up huge amounts of revolving debt – which usually means credit card debt – is one of the main reasons why people’s credit scores fall. So next time you decide to put that flat-screen TV on your credit card, remember that a large amount of credit card debt could prevent you from landing that dream job.

Careful With Credit

The national unemployment rate finally fell below 10 percent early this year. But as of the end of January, it still was at 9.7 percent. There are a lot of applicants, then, for every available job. This means it’s essential that job candidates do everything they can to give themselves an edge. This includes bringing a solid credit score to the table. The Society of Human Resource Management recently conducted a survey of about 100 employers. A total of 60 percent of them said that they checked credit histories for many of their hires. That’s a big jump from 2004, when just 43 percent of employers in the same survey said that they checked the credit histories of applicants.

Pay Bills on Time

Your credit score can also plummet if you fail to pay your credit card bills on time. Every time you fail to pay a bill, whether it be a credit card bill or an auto loan payment, your score will suffer a bit. If your score falls too far, below 620 or so, potential employers may view you as a person who’s not responsible with his or her finances. They may then wonder if you’ll be an irresponsible worker, too. Remember, when you’re competing against dozens of job seekers for a position, you don’t want to give potential employers any doubts at all.

Restore your Credit

If your credit score is low, there are steps you can take to boost it. First, make a vow to pay all your bills on time. This is the surest way to improve sagging credit scores. Secondly, make extra efforts to pay down the debt on your credit cards. Again, this will have a positive impact on your scores. And finally, put your credit cards away when you head out on the town. The best way to keep from abusing credit cards is to remove the temptation to use them.

When you are setting out to secure a loan, a personal loan calculator can be of real help in determining various aspects of the loan, including such important things as monthly payments. Many people find it to be a very handy tool in helping them to decide how much to borrow, and for how long.

The good news is that no matter what you are borrowing for, be it a home, a car, a student loan, etc. there is undoubtedly a personal loan calculator available to help you more clearly see the costs involved in the loan. This, and some savvy shopping, will help you to get the best personal loan rates. Here are some other ideas:

• Know Your Credit Score. This is typically the best starting point for anyone interested in taking out a loan, and a way to level the playing field by having a realistic idea of how you appear to creditors. It’s an important thing to know, and since you can get a free copy of your report each year you should do so; it will play a big role in getting the best personal loan.

• Down Payment? If purchasing a new home or a car, do you have at least a 20% down payment? While that much is not necessary to get a loan, it is in your best interest if you can do so. Just use one of the calculators to determine your personal loan interest payment amounts based on different or even no down payments to see the difference.

• Shop and Shop Some More. When looking for a new loan, it is very important to know all of your options. While checking with local banks and credit unions is a good idea, it’s not the only place you should be looking. Today, with the power of the Internet, you should use its long reach to get a good idea of all the loan options that may be out there for you. By doing so, you may just save yourself a bunch of money in the process, as you are not bound to a small geographical locale, and the lenders that reside there.

There are many important things to consider when you are shopping for a loan, and consulting with a financial adviser, if at all possible, is a good idea. They have the expertise to help you, and steer you in the right direction. As long as you know what shape your credit is in, you’ve shopped around, and used a good calculator to determine whether you can afford the loan, you should be on your way.

If the latest economic numbers are to be believed, the U.S. consumer might be spending again, something that could mean good news for the debt consolidation industry. According to a recent story by the Washington Post, the U.S. economy grew by a healthy 3.2 percent rate in the first quarter of 2010. An increase in consumer spending fueled this growth, according to the Post story. Consumer spending jumped by 3.6 percent in the quarter, the largest increase in this statistic since the first quarter of 2007.

Is The Consumer Back?

Of course, the numbers beg one important question: Is the U.S. consumer back after several months of saving? The United States has long been a country in which consumers didn’t seem to mind running up large debts on their credit cards. During the worst days of the Great Recession, though, as people worried about losing their jobs, a growing number of consumers put away their plastic and instead saved their dollars. It was a bit of a shock to read the numbers and find that consumers were being cautious in their spending habits. Financial analysts, though, wondered if this frugality was the start of a longer trend or simply a brief reaction to soaring unemployment.

Evidence of A Short-Lived Trend?

You could argue that the latest numbers on consumer spending, that fairly big increase in the first quarter of this year, suggest that consumers are eager to resume their free-spending ways. No one knows for sure, of course. The first-quarter rise could merely be a blip. But the U.S. consumer has a history of running up debt. It wouldn’t be surprising if consumers returned to that habit as the economy slowly recovers. And if consumers do return to their credit cards, it should be no surprise, either, to see the debt consolidation business enjoy another boost.

The Debt Consolidation Option

Debt consolidation loans have long served as financial safety valves for debt-ridden consumers. When their credit card debt gets too high, they can rely on these loans to stop the collection agencies from calling. With a debt consolidation loan, consumers make just one monthly payment, which they can afford, and their debt consolidation firm pays off their creditors from these dollars. It’s not an ideal solution: Debt consolidation loans can negatively impact consumers’ credit scores, and they often come with high interest rates and fees. By taking out one of these loans, consumers will end up paying more than if they paid off their loans themselves. But if consumers do return to their free-spending ways, more of them will have few options but to return to these loans.

Finding the best unsecured personal loans can be tricky, as it’s not uncommon for some lenders to quote one thing over the phone, but then offer you something very different in person. Typically they have what they see as a very good explanation for this difference, but that doesn’t help you. So how do you go about separating the wheat from the chaff?

Obviously the Internet is a very useful tool in many different ways, and this is no exception. One thing that may well be of great help is to try and find a good web page that features reviews of lenders who offer high risk personal loans. Being able to read about other peoples experiences with particular lenders can give you great insight. Some other things you may want to consider are the following:

• Local Banks Aren’t Your Only Option! While they may be a good place to start, along with credit unions and other local sources of a loan, have you considered an online personal loan? Once again, your old friend the Internet can help you gather a great amount of information, and give you some leverage when it comes to getting a real overview of your choices, with a much larger selection to choose from!

• Be a Savvy Shopper. It’s important to do some research! Find out not only what your credit report is actually saying about you to lenders, but also take that information and research what people with a similar credit profile typically get as far as interest rates are concerned. With this information, you’ll have a better idea if a particular lender is even in the ballpark when it comes to loan offers.

• A Quick Reality Check. Ask yourself if this loan is absolutely necessary. Have you exhausted all other possibilities for securing this money? Another thing you’ll want to do is closely question the lender about anything you don’t understand, and determine what will the total cost of the loan be, as opposed to just knowing what the monthly payments are. Can this loan potentially pay you back in some way, whether that is giving you a chance to repair your credit, increasing the value of your home via home improvements, etc.

It’s important to shop and ask lots of questions when you’re looking to take out a personal loan with less than ideal credit. We all know how tough times are for many people in this economy, and obviously that includes businesses as well. The good news is that lenders are just that—people who want to lend money, even when the personal loan is unsecured, and if you do your homework you can save yourself some real money.

There are times when some unforeseen issue is demanding money yesterday, and a bad credit personal loan is your only option. This should typically be the scenario, that it’s a real pressing need, before you apply for this type of loan. Something you should prepare yourself for is that the interest rate is going to be high.

With all that being said, it’s not impossible to make a personal loanwith bad credit work for you, but you have to be smart about it. The most important thing that you can do is to make sure you’ve done your homework, and know what you’re getting into. Here are a few insights that may help guide you:

• Credit Report First. It is imperative to not only know what this looks like, but also to be sure that it is up to date and correct. It is not uncommon for credit bureaus to make mistakes, so don’t make one yourself by not getting a free copy of your report and double checking it.

• Go Online. While you’ll certainly want to shop around with local banks or credit unions, don’t forget that there are many choices for an online personal loan. One big advantage of going this route is that you get a really good picture of what the best deals out there for you may be, and not just the ones from your locale.

• Be Smart. Don’t go after the biggest loan that you can get, while planning to make small payments. To avoid this loan costing you any more than necessary, you should borrow the least amount needed, and pay it back quickly, by making larger than the minimum monthly payment. This is a very good strategy to lessen the effect of the typically high interest rates for these loans, while preventing yourself from getting into an even tougher situation with debt.

It’s a tough situation to be in, when you need money but have poor credit. For that very reason you should be sure to research the possibilities of getting a loan with as many different personal loan providers as possible. It may also be a good idea to consult a financial adviser if you are able to do so—they can offer really good insights into the borrowing process, often ones that many of us might overlook.

In closing, know that your situation isn’t hopeless, and that there is most likely a loan out there that can work for you. If you take the time and put in the effort to check all of your choices and make sure your credit report is accurate, you should be able to find the help that you need.

Don’t be ashamed if you need to take a debt consolidation loan. You’re far from alone in having financial troubles. In fact, some of the largest and most important corporations across the country are struggling to pay their own bills. There’s a difference between them and individuals, though: The corporations often get huge amounts of government help. Individuals? They usually need to turn to relief sources such as debt consolidation loans to erase their debt.

Fannie Mae in Trouble

Consider the case of mortgage financing giant Fannie Mae, a quasi-government agency. The company reported a net loss of $11.5 billion in the first quarter of 2010. That’s a lot of money to lose, but it actually ranked ahead of the fourth quarter of 2009, when Fannie Mae suffered a net loss of $15.2 billion. Fannie Mae officials did what you’d expect a suffering corporation to do: They asked the federal government for help. The acting director of the Federal Housing Finance Authority has asked the U.S. Treasury Department to send $8.4 billion in financial aid to Fannie Mae by the end of June. The government’s reasoning is that Fannie Mae is too important to fail. The company finances a huge number of mortgage loans each year. If Fannie Mae were to go under, the country’s housing finance industry would certainly implode.

Individual Guilt

The Fannie Mae case is an interesting one, though, because it points out a fundamental difference between the way individuals and corporations handle debt. Corporations have no trouble asking for help. Individuals, though, often feel immense guilt over falling into debt, even if outside circumstances such as a job loss, serious illness or a cut in annual pay helped cause the debt. For many consumers, taking out a debt consolidation loan, filing for bankruptcy protection or asking family members for financial help is a source of shame. It’s a sign that they’ve failed. Most corporations happily take their federal relief money and go about their business.

An Attitude Change

Consumers need an attitude change. They need to realize that falling into debt can happen even to the most frugal and cautious among us. After all, no one’s job today is safe, not with the national unemployment rate still hovering near 10 percent. If you do need the help of a debt consolidation loan, don’t waste time feeling guilty for your debt situation. Instead, spend time researching debt consolidation companies so that you don’t end up paying too much in interest rates and other fees. And prepare yourself, too, for the hit that your credit score will take. Once you take on that consolidation loan, it’s time to start planning a strategy to rebuild your ailing credit score.

Is a cash-out refinance a good option for debt consolidation? At least one financial expert thinks not. Don Taylor, a financial advice columnist for the Web site Bankrate.com, recently wrote about the dangers of taking credit card debt and turning it into mortgage debt. After all, credit card debt is an unsecured loan. It’s annoying, and it’s a financial drain. But when consumers fail to pay their credit card bills, they don’t run the risk of losing their homes. However, when they fail to pay their mortgage bills, the threat of losing their residences to foreclosure is a very real one. For this reason, Taylor writes, turning unsecured credit card debt into mortgage debt can be a dangerous method of debt consolidation. Taylor advises that consumers stay away from it.

How It Works

You can only use cash-out refinancing if you have enough equity in your home. For instance, if your home is worth $300,000 and you have a mortgage loan of $250,000, you have $50,000 worth of equity left over. If you refinance your mortgage loan, you can refinance up to the value of your home, $300,000. You then get the extra $50,000 to you in cash. You can use that cash to pay down your credit card bills. The upside of this is that your new mortgage loan will undoubtedly have a lower interest rate attached to it than will your credit card debt. In essence, you are replacing high-interest-rate debt with low-interest-rate debt. It’s a winning swap.

The Risks

However, like most financial transactions, a cash-out refinancing does come with certain risks. As Taylor explains on Bankrate.com, there’s a reason why people run up huge amounts of credit card debt. If they don’t address those reasons, and change their spending habits, they run the risk of simply running up huge sums of credit card debt again. If they do this, they’ll again have large amounts of credit card debt and an extra amount to pay back on their new larger mortgage loan. This, of course, is hardly an effective debt consolidation strategy.

Losing Their Homes

An even more serious risk, though, is the very real threat of foreclosure. Consumers who run up huge amounts of credit card debt are more likely to default on their debts. That includes mortgage debt. If these consumers turn their mortgage loans into larger ones in a cash-out effort of debt consolidation, they run the risk of not being able to make their mortgage payments. If they miss these, they don’t just suffer dings to their credit scores. No, their mortgage lender or bank might foreclose on their home. It’s a huge risk for consumers who haven’t addressed their underlying spending problems.