If you have poor credit and judgments against you, getting a loan may seem next to impossible. Basically, there are only two ways for you to get a legitimate loan with poor credit and judgments: Either pay an extremely high rate of interest or take out a 100 percent secured loan. In this article, we'll describe how to get a secured loan and how this can actually help to rebuild your shattered credit rating.
Secure some cash or other bankable collateral, such as real estate, a car, boat or something else of value. Most lenders will not be interested in making loans of less than $500, so you will need collateral of at least that amount. Note that noncash collateral may need to be appraised for at least double the amount of the loan you are seeking.
Present your collateral to your lender. In the case of cash deposit, your cash would be put into a savings account with the lender. In the case of noncash assets, bring proof of ownership and proof of current value.
Negotiate the best terms possible for a 100 percent collateralized loan. If you are using a hard asset as collateral, such as a car or boat, the lender may require up to 200 percent appraised value for the loan you seek. Because the lender has no chance of a loss on the loan, you should be able to get excellent terms, regardless of your credit or any judgments against you.
Deposit the proceeds of your loan into an interest-bearing regular savings account.
Withdraw the loan money from the interest-bearing savings account at the end of 30 days and use the money to repay your loan in full. You will have to pay a few dollars of interest out of your own pocket, but it shouldn't be much.
Repeat the process, increasing the amount of collateral if possible so as to increase the size of your secured loan. Again, repay the loan after 30 days using the money you borrowed plus a few dollars of interest from your own pocket. You have now successfully taken out and repaid two loans ahead of schedule. This will go a long way toward re-establishing your credit and may make you eligible for a small unsecured loan, despite your credit and any judgments against you.
Things You Will Need
- Cash or other collateral
- Depending on just how bad your credit is and the type and amount of the judgments against you, you may have to take out three or four secured loans before you will qualify for an unsecured loan.