The Ideal Loan Lender
What to Look for and Watch Out for in a Personal Loan Lender.
There’s one thing that stands between you and the credit you need – a loan lender. Typically you will borrow money from your financial institution or a reputable loan broker or lender. However what do you do if your credit score is less than par (a good credit score is 720 and higher)?
You will likely need the services of a subprime loan lender. A subprime lender, also referred to as a hard money lender, is a lending institution or individual who lends money to those with poor credit scores and bad credit history. They will normally be your last resort when your bank refuses to approve you for a loan – due to:
- Low credit score
- Bad credit history
- Zero down payment
- No proof of income or employment
- Recent bankruptcy
A subprime lender should be your last resort, meaning you’ve absolutely exhausted all other options for credit. This is because subprime lenders charge financing rate that are higher than the "prime" rate offered by traditional banks and other well known lenders. This is due to the fact that the people borrowing from a subprime lender are high risk borrowers, meaning their credit histories show that they have been irresponsible with credit in the past.
So why do people go to subprime lenders for a loan? Well, because they have no other options. If you need credit and have to go to a subprime lender, you can still end up paying off the loan if you are careful. The key is being fully aware of your borrower’s agreement, and not letting a shiesty lender get the better of you.
When it comes to choosing a subprime lender be wary of the following:
Recognize a rat – Don’t trust a lender that acts like he or she is doing you a favor by lending you money. Lending is how he or she makes his money, so remember he or she needs you as much as you need them. All the lender should care about is that you repay the loan on time and make diligent payments.
Low rate promises – Never ever sign the first loan agreement you see. As a rule get at least 2 to 3 different loan quotes before deciding. If you’re lazy you will likely end up with high interest rates. If you compare, at least you know you’re getting the best interest rates, terms and lowest fees available to you.
Check out the credentials – If you were applying for a job you better bet your potential boss would check your employment history – and maybe even do a police check. Well why would you ever put your finances in the hands of a lender without checking his or her credentials? Perform your own background check online and through your local Better Business Bureau first, before signing a loan agreement with any subprime lender.
Understand the terms – Read the fine print and ask to take the agreement with you if you want to. If the lender doesn’t let you think about it, or won’t explain things to you until you understand don’t sign anything until speaking with a financial advisor.
Fees of desperation - Don’t fall for this trap! Many subprime lenders think they can bully clients into paying hefty upfront fees in order to secure a loan. If your potential lender knows your desperate for a loan and is trying to take advantage of it – walk away! They will try to bait you with the excuse that they require upfront fees to cover your first loan payment and application processing. You can find reputable subprime lenders that charge zero fees or low nominal fees.
Money-minded – You should be aware of how much you need to borrow before heading to a lender. That way if a lender tries to get you to borrow more than you need you’ll know they are trying to trap you into a loan you can’t afford to pay off so they can get you on high interest payments.
Look for gaps – Don’t sign a loan agreement that is only partially filled out. Reputable lenders will provide you with complete documents – you will get a copy and they will get an exact copy. This way nothing can be changed later on.
Further things to consider – when it comes to loans and lenders
Be wary of current interest rate trends - When you apply for any loan it is your responsibility to do the research so that you know you’re getting the best interest rate. Even traditional lenders have varying rates; however subprime lenders’ rates can range between 7% and 12% - that can add up to thousands of dollars in difference. Before you sign a loan agreement be advised of the current market trends on loan interest rates – and shop around with at least 3 different lenders.
Never allow a lender to play up your bad credit to their advantage - Shiesty lenders will often make it seem like you have no other choice in a loan due to your bad credit history. They will charge you outrageous interest rates as a result. Don’t buy it – look elsewhere for subprime loan with fair terms.
Get yourself a copy of the Good Faith Estimate and Truth in Lending - This document will tell you the standards on loan terms and costs from various lenders. It provides borrowers with the information they need to shop for a good lender and loan, so they don’t get hosed.
Don’t be afraid to negotiate – Don’t let promises of extra cash or threats on your poor credit history lead you away from what you came for - a loan that you can afford.
Be loan smart – If it seems too-good-to-be-true it likely is. Beware of phone, email and mail solicitations for loans. As a general rule stay away from any lender that starts his or her advertisement with “Bad credit? No problem.”
Don’t be a loan victim – Just because your credit score is bad does not give any lender the excuse to rip you off! If you have been the victim of a crooked lender contact your local Better Business Bureau to report them immediately
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