A Borrower's Guide to Poor Credit Loans in PA
Poor credit loans in Pennsylvania (PA), where to get started and what all borrowers should know.
You've been turned down for a loan because you've got bad credit.
Should you throw in the towel and give up on getting a loan?
The truth is, there are actually loans out there that are meant to help poor credit borrowers get their hands on that much-needed cash. If you've got a decent job and can show the lender that you're making some improvements with your spending habits, you might be able to get that loan.
Sure, getting approved for a conventional loan with bad credit might be tough. But loans for bad credit in PA do exist, and they're meant for people just like you.
Keep reading to find out the types of loans that may be within reach in Pennsylvania if you have bad credit.
FHA Home Loans
One type of loan that you'll surely have trouble getting approved for with bad credit is a mortgage. Lenders have become very stringent with their lending criteria, especially after the housing bust that plagued the nation a decade ago.
But just because you've got credit doesn't necessarily mean you can't get a home loan. One particular program that helps bad credit borrowers, as well as those with a low down payment, is an FHA loan.
The Federal Housing Administration (FHA) backs these loans, which allow borrowers with credit scores of as low as 500 to get approved. The FHA doesn't actually hand out the loans. Instead, they guarantee them.
Down payment amounts with FHA loans are lower than conventional mortgages as well at 3.5%. However, a higher credit score will be required (usually around 580) to take advantage of this lower down payment amount. If you've got a credit score of 500 to 579, you'll need to put down 10%.
PA Home Equity Line of Credit
If you're lucky enough to already own a property, then you may be eligible to tap into a home equity line of credit (HELOC). In order to qualify for this loan, you'll need to have a certain amount of equity already built up.
The idea behind a HELOC is that you can borrow against the equity of your home. Basically, your home would serve as collateral for the loan. That means if you default, the lender can repossess your home, so you'll need to make sure you're diligent with your payments.
You might need cash to pay for home improvements or pay down high-interest credit card debt. You might even have to cover the cost of your kid's college tuition. Whatever the case may be, a HELOC can be a great loan to take advantage of.
Most lenders require that borrowers have at least 10% to 20% of equity left in their homes after taking out a HELOC.
Let's say your home is worth $300,000 and you still owe $150,000 on your mortgage. That means you've got $150,000 in equity, or 50%. If your lender wants you to have 10% equity left in your home after borrowing against it, you'd be able to borrow a maximum of $120,000 in order to leave 10% ($30,000).
The less equity is left in a home, the higher the risk of foreclosure if interest rates rise or values of homes decline. That's why lenders want to make sure there's still a certain amount of equity left in the home before they allow borrowers to tap into their equity.
These types of loans for bad credit in PA are great for borrowers with scores that are less than par. Since there is collateral with the HELOC (your home), lenders have more security. As such, many are willing to extend HELOCs to bad credit borrowers.
That said, each lender may have their own credit score requirements. Some may allow lower scores, while others might want their borrowers to have higher scores.
Loans With Co-Signers
You might get turned down for a loan because of your shady financial history, but you might have a friend or family member who is in a better financial position to secure a loan.
Why does this matter?
Because that friend or family member may be able to help you get approved for a loan by co-signing it.
A co-signer loan from loan companies in Pennsylvania simply means that a traditional loan may be approved as long as a high-credit borrower in good financial standing is also named on the loan. This person would be responsible for taking overpayments if you ever default on your loan payments.
Having a co-signer on a loan not only will help you get approved, but it can also help you secure a lower interest rate. This will make your loan more affordable, so less will have to be paid towards interest over the life of the loan.
It's a risky position for a co-signer to be in. That's why it's important for you to make sure that you're capable and willing to make the payments on time every month. Or else your co-signer will be in the position to take over payments.
Peer to Peer Lending
Thanks to the internet, alternative loan options are now available. Peer to peer lending allows borrowers to connect with alternative peer lenders online. These types of programs are non-conventional and don't necessarily follow the same types of guidelines as traditional loans.
You may be able to find a lender who is willing to extend a loan despite your bad credit. These lenders might have more lax lending standards compared to banks. They may even provide you with lower interest rates than you'd get with payday loans in Pennsylvania.
Every lender will have their own set of rules, including what minimum credit score they require.
Credit Union Loans
Banks tend to be pretty strict with their lending criteria. Although credit unions have standards to follow, they tend to be a little less tight when it comes to qualifying borrowers for loans for bad credit in PA.
If your credit score is little on the low end, you may want to consider applying for a loan at your local credit union. You'll need to be a member of a credit union first, however, if you plan to apply for a loan.
Find Loans For Bad Credit in PA!
Have you been having trouble getting approved for a loan because of your poor credit rating? You're not alone. Millions of Americans struggle with bad credit.
But thanks to loans for bad credit in PA, you can still get your hands on those funds needed to cover any one of life's major expenses. If you're looking for a bad credit loan in Pennsylvania there are options. Educate yourself and make the best financial decision available.