There are relatively few loan and grant options for those with bad credit. The cause of bad credit will ultimately determine which loans are available. If you have bad credit because you are socially disadvantaged and have a short credit history, there will be more options than if your credit suffers because of poor financial planning.
SBA Loans for Socially Disadvantaged Business Owners
If you are a small business owner or looking to start a small business, the Small Business Administration may be a good resource for financing. You should note that there are minimum credit requirements for these loans. However, if your lack of good credit is a result of a socially disadvantaged background, you may qualify for the 8(a) Business Development Program. You will be judged more on your character and chance of success than on your previous financial history for this opportunity.
FHA Down Payment Grants
First time home buyers needing assistance meeting down payment requirements to secure a mortgage may look to the Federal Housing Administration for grants. These grants never need to be paid back, and they are made accessible to low credit borrowers. You will be required to attend training sessions and meet other criteria, but there are a host of grants available if you are willing to go through these programs.
High Risk Loans
You may have low credit as a result of poor planning instead of social disadvantage. If this is the case, most government loan programs will be out of your reach. High risk lenders specialize in extending financing to those who would not otherwise qualify. Many high risk lenders operate online, and you can find high risk lenders in your area with an Internet search.
Your credit score is assurance against default. Without a good score, you need to provide additional assurance. This can be done using collateral to gain a secured loan. Nearly any asset can be used as collateral including automobiles, home equity, stock certificates, savings accounts and personal assets. Secured loans are riskier for you, the borrower, but they are more accessible than unsecured loans if you have bad credit.
You can borrow the credit of a co-signer if other options are not working for you. Unfortunately, using a co-signer means the loan will not help build your credit to a significant degree if you pay it on time. Despite this short coming, co-signed loans are a good option if you are routinely denied financing due to your credit score.
- Smal Business Administration: 8(a) Loan FAQs
- FHA Down Payment Grants
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Based in Los Angeles, California, Bethany Eanes began her career in 2006. She specializes in legal, financial, and fitness writing, with publications on DUIAttorney.com and in local papers like "The Daily Breeze." Eanes earned a Bachelor of Science in history with focuses in humanities ad writing from Washington University.