Bad Credit Borrowers Can Still Obtain Loans.

Your credit may have been damaged, or your credit report is compounded with a history of foreclosure and bankruptcy, but you may still get a loan for home purchase, refinance, or even cash out of your current home. It doesn't matter whether you have charge-offs, collections, or tax liens on your credit report, as long as you can meet the specific guidelines for loan approval by a multitude of lenders specialized in the credit-damaged (bad credit) borrower.

Lenders make a judgment about character (your willingness to repay), capacity (your ability to pay) and collateral (the value of what you are buying) when deciding to grant you a loan. They can look at the same loan and view the same credit risk differently. So if your loan application is denied by one lender, there may be another lender out there whose credit risk criteria is different.

Candidates for a "Bad Credit" Loan

The failure to qualify for mainstream prime-rate financing is due primarily to low credit scores. When your credit score is low -- say, below 620 -- it's not going to be easy to get a loan at your local bank. Current statistics show one-third of consumers have credit scores of 620 or below, and a full 50% have some problem or blemish. To check your FICO credit score, visit Equifax.com or myFico.com.

The good news is that you can still get a loan although your credit score is not good. Sub-prime loans offer borrowers with low incomes or a poor credit history access to financing. Subprime loans typically have higher interest rates and fees than conventional prime-loans.

Generally, you may be a candidate for sub-prime loans if you meet one or more of the following conditions:

• a FICO score of 620 or lower
• two (or more) 30 day delinquencies in the past 12 months
• one 60 day delinquency in the past 24 months
• a foreclosure or charge off in the past 24 months
• any bankruptcy in the last 60 months
• qualifying debt-to-income ratios of 50% or higher
• limited ability to cover family living expenses each month

Subprime Lenders

The development of the sub-prime market has made financing available to a segment of the population that otherwise would have been shut out of the market.

Sub-prime lenders base their rates and fees on the same factors as prime lenders. For example, rates are higher the lower the credit score and the smaller the down-payment. However, the entire structure of rates and fees is higher at sub-prime lenders to cover the greater risk and higher costs of sub-prime lending.

Sub-prime lending costs are also higher because their operating costs are higher due to higher risk.

Note: Some borrowers who are eligible for loans from mainstream lenders end up in the sub-prime market. They are prime borrowers but they pay sub-prime prices. Checking your credit score and getting multiple loan quotes are important to get best deals.

Best Strategy : COMPARISON SHOPPING

Don't assume that minor credit problems or difficulties stemming from unique circumstances, such as illness or temporary loss of income, will limit your loan choices to only high-cost lenders. Underwriting requirements can differ from one lender to another, so it is quite possible that a borrower with problems, who is not eligible at one lender, will be eligible at another.

Comparing loan plans can help you get a better deal. Check with a number of lending institutions and compare their fees and rates. It's easy on the internet. You will not know if you are being offered the best "deal" if you do not comparison shop. Take the time to shop around and negotiate the best deal that you can. Remember that bad credit does not deserve a bad deal. It is recommended to get quotes from at lest three different lenders and compare their rates and fees.

A low monthly payment is not always a great deal. Instead, ask the lender about the total cost of the loan. Ask lenders to explain the best loan plans they have for you. Beware of loan terms and conditions that may mean higher costs for you.

When you decide to sign a contract, make sure all the terms you were promised are included. Take the time to read the fine print. If it's a mortgage, make sure you understand every -- and I mean every -- fee you will be paying. And the interest rate. Don't be afraid to ask for help. If you don't understand any of the terms or conditions of the loan ask before signing.

Compare the following items from each institution before choosing a lender:

• Annual percentage rate (APR: This is the most important factor to compare because it counts interest rate and points, along with broker fees and other charges the lender may require you to pay. Generally, the lower the APR, the lower the cost of your loan. Ask if it's fixed or adjustable (i.e. will the rate change?).
• Loan term: How many years will you pay off the loan?
• Monthly payment: How much each month? Will that change?
• Is there a balloon payment? This is a large fee, usually at the end of the loan term, often hitting you after a series of low monthly payments.
• Is there a prepayment penalty? You don't want to pay extra fees if you come into cash and pay off the loan early, or refinance or sell your home.
• Will the interest rate increase if you default? This means if you miss a payment, or make one later than the deadline, you may face a higher interest rate for the rest of the term.

Bad Credit Loan Providers

Bad Credit Help Center has teamed up with a wide range of lenders to provide you with a wide range of loan quotations for you. We recommend that you request at least 3 different quotes because different companies offer different quotations for different details.

We have compiled a list of lenders who offer a range of loans for people with varying credit histories. We've helped many people with less than perfect credit get the loan they need.

• Auto Loans
• Home Equity Loans
• Mortgage / Home Loans
• Personal Loans
• Debt Consolidation Loans
• Payday Loans

To get a better deal, shop around among lenders and don’t take the first loan you are offered. Bad credit does not have to deserve a bad deal.