Financing is the use of a loan or credit. Banks, car and furniture stores and other lenders spend a large amount of money on a borrower. This pays back the borrowed amount in contractually agreed installments.
Requirements for borrowing despite private credit
- Alternatives for better credit prospects despite private credit
- Loan types for a loan on existing private credit entries
- Recognize and avoid unserious loan offers
- Example cases of financing despite private credit
- For whom the financing is particularly suitable despite private credit
- Benefits of poor credit financing
- Disadvantages of financing despite private credit
Because this involves a risk for the lender, he examines the comprehensible financial circumstances of the borrower before lending. Because in the private credit entries are to be found, which point to previous payment difficulties. Nevertheless, financing can be agreed under certain conditions despite private credit.
Requirements for borrowing despite private credit
Private credit entries usually last three years from the time of payment. If you were able to achieve a better credit rating in such a period, you should check whether there are any obsolete and now invalid private credit entries before making a loan application. Also, it should be clear – before a transaction with lenders – that the planned repayment of income / assets will not lead to new difficulties.
But it should also be checked before a planned financing, despite private credit the loan offer itself. Not infrequently, the alleged goodwill of the lender is extremely expensive. This could reinforce an existing repayment problem in the future. Good conditions for borrowing are guarantors or collateral in kind. For this purpose, reputable loan providers at least accept the applicants with the loan amounts and repayment targets. Because this offered credit requirement minimizes the risk of a repayment default.
Alternatives for better credit prospects despite private credit
- Provide collateral
If a borrower can prove a contract for an open-ended employment contract despite a private credit entry, this is to be regarded as collateral offered to the lender.
If the amount of the agreed salary in the credit check is considered sufficient for a pleasingly high and fast installment, this will improve the credit prospects at least for car dealers and other credit providers. Banks will be very careful here.
- Choose short repayment term
Equally accommodating are lenders in the financing, despite private credit, if a quick repayment, so a short repayment period, can be offered. It may be that a home loan saver is due soon, or another, currently running and paid for the necessary sum savings can be borrowed.
- High deposit
It may be necessary to pay only part of the financing for a planned, larger investment. Then many lenders go for a large deposit. This improves interest rates and the prospects of moderate maturities and installment levels, even with better credit ratings.
Loan types for a loan on existing private credit entries
- instant loans
are also granted for private credit entries, but only earmarked and in limited loan amount. The purpose is a car purchase, a planned conversion or new building or another value acquisition in which the object of the financing represents a security for the lender.
- Swiss credit
A young special form of financing despite private credit is the “Swiss Credit”. It is granted throughout Europe without private credit information, but requires a very secure actual situation of the current income situation. Also, the granting of a Swiss loan involves higher interest rates and repayment times are limited. Borrowers who are already experiencing economic problems would, in the long term, aggravate their situation with this type of loan.
A less risky, but smaller-sized loan type is “Deutsche Kredit”, a micro- loan that is preferably given to StartUps on presentation of guarantees. The interest rates are moderate compared to the Swiss model, the maturities similar.
Recognize and avoid unserious loan offers
Anyone who advertises massively with funding despite private credit is probably hardly interested in the financial protection of the borrower. However, it is still possible to identify a provider as reputable if the following pitfalls are missing in the corresponding offers:
- Reputable lenders charge no shipping costs and do not send credit documents by cash on delivery.
- The granting of financing in spite of private credit does not make a reputable provider dependent on the advance payment of any fees for credit brokerage or comparisons of financing offers. In reputable lending business such services are free of charge.
- A reputable lender can be reached by phone, e-mail, post or via a contact form on the website free of charge. If an expensive hotline is offered or even passed on a home visit, the offer is not recommended because of the risk of rip-off.
- Participations as a condition for financing in spite of private credit are not a serious option, nor are insurances that are indispensable.
- A popular scam not a reputable lending despite private credit is a counseling service in the context of a bankruptcy counseling as an escort service for financing. However, these providers are almost never trained or authorized to perform such bankruptcy counseling.
Example cases of financing despite private credit
Buying a car is a good example of how financing, despite private credit, is possible for the borrower. Depending on the car dealer’s willingness, there is the option of paying a high down payment on the vehicle and paying off the remainder in moderate installments for a short period of time.
To categorize is such an example case in the area of instant loan. The prospects for this improve if the car is offered as collateral or a second borrower with good credit standing as a guarantor in the loan agreement.
The instant loan despite private credit entries is also granted by leasing providers. Another example case in the commercial sector may be the pre-financing of machine purchases via a loan.
Despite a potentially poor credit rating, an operation by pledging the machines to the lender can improve the economy. Because these are rated as very secure and generate at best the rates plus a surplus during the repayment period, which in turn improves the credit rating in the long term.
For whom the financing is particularly suitable despite private credit
Young borrowers with past private credit entries bridge a short-term financial bottleneck well with microloans on short payback targets. This option is particularly suitable for leasing or purchasing vehicles. Commercially, small businesses or start-ups with previously poor credit ratings for the purchase of machinery can use these machines as security for financing. Depending on the repayment target and the efficiency of the machine park, it is possible to work in both the borrowed money and a profit for better business times in the future.
Benefits of poor credit financing
- Good option to be able to make an acquisition in current secure income situation despite past repayment problems
- In case of serious contract variants and currently safe repayment situation good long-term bridging of short-term liquidity problems
- Especially for financing despite private credit for car or furniture purchases small amounts of funding with a sufficiently high partial deposit possible
- Microcredits with a clearly manageable repayment target possible
Disadvantages of financing despite private credit
- High interest rates with comparatively inflexible repayment modalities
- The residual risk of a repayment difficulty in the case of surrendered collateral, for example a car in the event of an accident – an adequate supplementary car insurance can reduce the risk here
- Risk of dubious offers – scrutiny of the clauses protects against unnecessary additional costs
In retrospect, this means a fall in interest rates, but overall an increase. Rather, statistically secured consumer loans are classified. These include, for example, real estate financing or car purchases, where the acquisition object is offered as collateral for the financing.
Financing despite private credit is possible, but requires the provision of collateral and care in selecting reputable providers. The interest rates for this form of financing are currently relatively stable, albeit higher than for financing in the case of good credit ratings.