When You Should Consider Alternative Financing

When You Should Consider Alternative Financing

Man, it sucks when you keep dumping hundreds of dollars into your 2005 Dodge just to keep it on the road. If only you could use that money on a newer-model car that would be more dependable and reliable.

Easier said than done when your credit is shot.

So, while you work your tail off, you continue to struggle trying to make ends meet. Is there a faster, viable solution that doesn’t take months to resolve? Let’s take a closer look at alternative financing and when it makes sense to utilize it.

Unable to Obtain Conventional Financing

Has your credit or FICO score been less than perfect? If so, you may have learned the hard way, like when applying for a mortgage, that your ability to get conventional financing is difficult if not impossible.

Conventional financing means seeking a loan or line of credit through one of the top lenders in your area. The first thing they look at is your credit score. You should get approved with a score of at least 620 to 640, but it will require careful review before loan approval. If you can’t get approved for a mortgage through a lender, you may wish to seek alternative financing, such as a land contract or rent-to-own property. This may involve a higher interest rate and fees that can result in a higher monthly payment and longer loan term.

You’re in a Debt Repayment Program

Alternative lending may be viable if you’re already in a debt repayment or debt management program. If you’re still paying on a substantial debt load from the past, you will likely get turned down from your bank for a new loan.

Choosing a peer-to-peer lending program in which another business owner or investor lends you money but requires a stake in your business is risky, but it can be a way to get your business to launch. You may not need a copy of your credit report, just a business plan and financial outlook report. The only drawback is you need to make sure you continue with the debt repayment program and meet the new loan terms.

Still Recouping From a Bankruptcy

Do you have a past bankruptcy that has damaged your credit? This can make it impossible to get a new loan at good rates and terms. According to myFico.com, a bankruptcy stays on your report for 7 years with a completed Chapter 13 and 10 years for a Chapter 7. If you’ve gone through either, alternative financing for a new auto loan may be an option. Many auto retailers offer their own financing. The terms are longer, but many of these lenders can get you into an affordable payment on a later-model vehicle.

You Have Limited Liquid Assets

Are you young or perhaps you don’t have your credit established yet? This means you may not have any liquid assets like a paid-off vehicle or home. If this is the case, consider alternative financing for a payday or short-term personal loan. You can find these lenders online, and the application process is simple. All you need is a consistent income, bank account and ability to verify your address.

These lenders don’t go through local banking institutions and often lend to borrowers who have poor or no established credit. Loans are short term and include high interest and fees, but they can help out in a pinch when you need cash fast. Just make sure you can pay them off quickly, or the interest will snowball into massive new debt.

Alternative financing may be a risky choice, but it can get you access to funds so you can move on with your life. The ultimate goal is to have a good credit score, giving you unlimited borrowing power with minimal interest rates. While you work on that, you don’t have to go without. Find a reputable lender who can help.

~Here’s to Your Success!

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