If you are in need of additional financing to make a necessary purchase or pay off an outstanding debt, securing a loan from a bank or credit union is likely to be your best alternative. However, if you have bed credit due to past financial troubles, you are going to have an extremely difficult time finding a bank or credit union lender to approve you for a loan.
If you are in this situation, there are alternative options available for you. In fact, it may even be possible to avoid borrowing money and still take care of your financial trouble. Below are some great tips provided by LILA which can give you alternatives for extra funds if ever you’re denied a loan from a bank and/or credit union.
Take Control of Your Household Budget
Before you do anything else, it is important that you get a clear understanding of your current financial status. Take a look at how much income you have coming in the household on a monthly or fortnightly basis. Then look at the different bills that need to be paid each month and calculate how much you need to spend for your monthly expenses, such as food costs, utility bills, and transport fees. This will give you an idea of how much you have available to put towards a loan or any extra you can use to pay off your outstanding debt.
Ask for a Hardship Variance
If you owe money to any utility company, credit card firms, mortgage lender, or other type of loan payments, contact the company directly. Explain your current situation to them and inquire if you qualify for a hardship variance. If you do, this may actually reduce the overall amount of money you owe, lower your monthly payments, or halt your payments for several months until you have time to catch up with your bills. Ensure that you have worked out your household budget before contacting these companies, so you know exactly how much you have available to pay each month if they want to set up a payment agreement with you.
Alternative Loans – examples are Australia specific, but similar programs should be in your area.
If you have been denied for a loan by a bank and/or credit union, there are some alternative loan options that may be right for you. Below is a look at the top four types of alternative loans that make work for your specific situation.
- Guarantor Loan. This type of loan requires that you have someone else, who has good credit and is willing to sign the loan with you. While you are still responsible for paying this loan, it will fall back on the co-signer, or guarantor, if you fail to make your regular payments. Due to the high risk for the guarantor, it can be difficult to find someone willing to do this for you.
- Advance Payment. Depending on how much money you need, you may be able to ask for an advance payment on your wages from your employer, or an advance payment on your benefits through Centrelink. If your employer is willing to do this, it can be a great way to get the money you need without being charged any interest. The Centrelink office will allow you to receive an advance payment on your benefits and slowly pay it back over time. Depending on the circumstances, you may be eligible for up to $1,192.80 in advance benefits.
No Interest Loans Scheme. If you are a low-income earner, you may be eligible for a no-interest loan from the government. You can obtain a loan for up to $1,200 and repay it over the next 12 to 18 months. These loans include no interest, fees, or upkeep charges.- Step Up Loan. You could also be eligible for a StepUp loan that is designed to help low-income earners get the financing they need. If you qualify, you can borrow between $800 and $3,000. These loans come with a very low interest rate and can be paid back over a three-year period.
Financial Counseling
If these solutions do not work for you or you are still facing financial problems, you may want to seek the advice of a financial counselor. These counselors can take a look at your current financial status and provide expert advice on what options may be best for your specific situation. They may also be able to work payment plans out with your lenders for you.
The most important thing to remember when looking for financing is to be very leery of any company promising to provide you a loan without doing a credit check such as payday loans and title loans. This type of lending sounds good at first, but it always comes with an extremely high interest rate. This means that you will be repaying much more money then you borrowed in the first place, and it will most likely worsen your financial problems. To avoid putting yourself in financial sink hole, try the tips listed above and avoid these loans at all costs.
***Photos thanks to 401(K) 2012 and Simon Cunningham of Flickr***
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