Your credit score is directly proportional to the various financial instruments or financial benefits you can join. Higher the credit score, your chances of availing financial options are better and vice versa. However, you will come across many such people who face a tough time finding appropriate options just because they have not been financially responsible at some point in time. And this financial irresponsibility gets recorded in their so-called “financial report card”.
While a good credit score will allow you to enjoy benefits galore, if you cannot boast of a high score at present, where do you turn to for funding? This is exactly what has been discussed in the paragraphs that follow.
How to combat funding challenges?
You don’t need to be an employee, you could be a business owner too. As an entrepreneur, if you are facing these challenges, what will your bail-out strategy be?
Let us find out more about the same.
Credit cards and banking institutes
This information should help you to heave a sigh of relief because studies reveal that credit card and bank loans constitute only 25% of the funding required by budding entrepreneurs or business owners of small to medium-sized companies. Why should this information give you positive thoughts? This is because it implies that you still stand a chance to get financial aid from the remaining 75% funding sources that will perhaps not take into account your credit score too seriously.
However, if credit cards are what appeals to you, be prepared to shell out a high-interest rate. Do not be disappointed because there is a range of bad credit loan options that will meet your purpose.
Turn to microlenders
These lenders are available online and they also operate from brick and mortar offices. These are non-banking institutes that will still offer you credit with a not-so-good credit score. But you must understand that you have not been financially responsible in the past and that’s reflected in your credit score.
Dealing with individuals with bad credit only means that the deal is risky for the lender. More importantly, lenders will try to safeguard their investment so that they can recover the same from you or any defaulter in the event of a loss. As such, the interest rate at which you get the loan will be higher than for someone with a good credit history.
Microlenders can extend a loan with bad credit that can range between USD$5000 and USD$20,000.
Turn to friends
Regardless of whether you are turning to your family or friends, you can expect to pay lower rates of interest. This is because they are not professionals and your near ones will go out of their way to help you out.
Unless there is dire need for cash, it is best not to opt for personal loans. This applies equally for the ones that have good credit too. Personal loans by default attract higher rates of interest. If at all you need quick cash, it is better to opt for smaller loans with bad credit than opting for one that has a high APR or Annual Percentage Rate.
Tap into the equity of your house
Depending on how much equity you have in your property, you can approach a lender to extend a loan amount for which you can use your property as collateral.
However, do not risk your financial assets unless it is necessary and you cannot do without using collateral as security for the lenders.