With 80% of Americans now living in debt, if you’re currently in debt, you should know that you’re not alone.
It’s important that you work hard to build your credit and pay your loans on time but you should know that it might take years for you to ever get out of debt.
The best loan options will take your financial situation into account and be flexible enough for you to thrive financially even while you pay them off.
To get your credit rating even higher than “fair” or average, check out these four options.
1. Home Equity Credit
If you have fair credit, you still might own your home. If you’ve already put some equity in it, then consider getting yourself a home equity line of credit. When you do this, you save on some of the risks while taking on others, as your home then becomes your collateral.
You can get a tax-deductible line of credit if you need a reasonable rate without a lot of restrictions on how you claim your credit as a tax deduction.
In order to qualify, you’ll need to have a loan-to-value ratio that’s below 80 percent, meaning that you’ve paid off a significant amount of your home. For anyone whose home value has gone up while they were paying it off, the lender can instead look at your employment history as proof that you’re eligible.
Shop around with a few different lenders to get the lowest value that you can. While interest rate fluctuates, you might be able to get a good interest rate to start with if your fair credit is climbing on its way to good.
2. Loans From Credit Unions
If you’re trying to get a loan that’s something like what a bank offers without as many restrictions, look into a credit union. If you have a pre-existing relationship with a credit union, you can get a loan from one of them fairly easily. Since their standards are more relaxed than a bank, just about anyone can join if you’re in the region that they serve.
Credit unions are non-profit entities that are there to serve a community. They offer loans and financial services for people at a much more reasonable rate than banks because of the lack of a profit-driven motivation.
You’ll also find that credit unions offer much better customer service than a bank.
Expect to pay much less when it comes to penalties and fees than you would at a traditional bank. You might be able to get an unsecured loan here easier than anywhere else.
The only problem is that your credit score is going to limit how much you can borrow. They’ll also be under much shorter loan periods than you’d get with other options.
3. Peer To Peer Lending
One of the most exciting developments in the latest changes to the shared economy is the availability of peer-to-peer lending options. At many of these companies, you join with a set amount of money and start lending it out to people at a rate that you can set. You’re allowed to screen the people who are looking to lend from you and get in touch with the community’s economy.
As a lender, you can get much better deals than a bank could ever offer. You also get the chance to get people excited about what you’re trying to fund. The people who are part of a peer to peer lending strategy might be much better attuned to what you’re doing than a bank loan officer ever could be.
While your credit score, employment history, and other mitigating factors still matter, you can get low-interest loans from people who want to see you succeed.
The interest rate is often lower than what you’d pay with credit cards with much less in fees overall. You even get to explain what makes your credit rating so low if this is holding you back from lending.
4. Get a Co-Signed Loan
If you’re surrounded by financially successful friends and family who want to help you succeed, they can help you out by helping you get a loan. If someone with good credit doesn’t need to loan anything out, they could help you by co-signing your loan.
Getting a co-signer is challenging but could be easier if you’re married to someone with a good credit history. You need to get people around you to understand that you’re trustworthy enough to pay back your loan. However, it’s hard when you have a fair or spotty credit history.
If they know you well and see you trying to get your affairs in order, they should be able to help you out. However, be aware that if you make any mistakes or fail to pay your loan, you’ll be dragging their credit down with yours.
This can help you get more flexible terms than you would on your own or without a co-signer but there are high stakes. You could put your relationship at risk and could even negatively impact someone else’s credit score while getting your own financial future together. For example, claiming bankruptcy would end up wrecking their credit.
In some cases, it might be better for you to ask the family member to lend you the money directly instead of going through a financial institution. If the family member has the money, it means you can both control the interest you’ll be paying.
The Best Loan Options Are Matched to You
When you’re looking at the best loan options for real people with real credit scores, don’t be discouraged. While you might not be allowed to take out enough money to build an empire, when you lend and pay back promptly, you bring your credit score up where it belongs.
If you’re looking for more financial resources to reach your financial goals, check out our guide for tips.
