Know About History of Loans

 

The history of lending can be traced back to around 2000 BC when merchants would give out grain loans to traders/ farmers in Babylonia and Assyria. The grains would then be paid back during the harvesting season. Later, some changes were introduced by the Roman law where borrowers were required to sign off ownership of their property but they would later regain full ownership after clearing their debts.

Establishment of bank loans

The idea of money lending was started by Italians who would set up stalls in various local markets and then use them as lending spots. The lenders would then sit on benches that were locally known as “banca” and this is where the word bank came from. At the time, there were no laws or rules controlling the lending process and the loan terms would greatly vary from one lender to the other.

The banking industry has undergone significant changes since then and the services offered are now centrally controlled to protect the interest of consumers. Some of the common services being offered today include saving, financing and insurance. Apart from banks, borrowers can also access credit financing from private lenders, credit unions and government sponsored programs.

Secured and unsecured loans

In secured loans, an applicant is supposed to pledge some valuable property as collateral and this is meant to protect the lender in cases of missed payments or defaulting. You can pledge assets like your house, car or business assets. There are benefits associated with secured offers including:

  • Obtaining huge financing with ease
  • Qualifying for reduced interest rates
  • Flexible repayment plan

There are also lenders who offer unsecured loans where applications are considered without the need to pledge collateral. Borrowers usually rely on unsecured offers for short term financial problems since they carry smaller amounts. Unsecured loans have some common features like quick processing, higher interest rates and shorter repayment periods.

Online lending

As a way of bringing financing closer to consumers, lenders are now offering lending services online and this is a move that has been adopted even by banking institutions. The online application process is pretty convenient since it involves completion of a simple electronic form. The applicant is then provided with quotes after an automated matching process that takes just a couple of minutes.

Borrowers using the online process are required to have checking accounts to facilitate wire transfer of approved funds. In some cases, the lenders may request for additional details or documents before releasing the required financing. Most online applications are processed pretty fast making it possible to conveniently handle even emergency situations like medical bills and quick auto repairs.

Bad credit and no history loans

The needs of persons with low credit standings are now well catered for in the modern lending sector and there are numerous programs that they can qualify for. This is also the same case with people with no credit history. However, bad credit or no credit loans are availed at higher interest rates especially where no security is required. They also carry smaller amounts and shorter repayment periods.

How Significant Is Credit Report Score  ?

 

Explaining Credit Report Scores

Credit ranking is largely used by loan providers to decide whether a borrower is creditworthy. This means that your options on credit financing will be limited if your scoring is not very impressive. The highest score is set at 850 while the lowest score is set at 300. There are various factors that can affect your credit standing including:

  1. Payment history

The way you clear your payments contributes to 35% of your score. There are various things that are factored in including cases and frequency of late payments. The bureaus will also take into consideration the time it takes to settle any missed payments. You can maintain a clean payment history by setting up automatic payment reminders to ensure that all expected payments are sorted out in time.

  1. Debt load

You total debt loan accounts for 30% and this is usually done as a comparison between your debts and the maximum offer that you can qualify for. To boost your chances of having a better ranking, you should avoid reaching the maximum limit approved on your credit accounts. It is advisable to keep using old accounts even if they are not very useful instead of canceling them.

  1. Credit period

Your credit duration covers 15% of your credit scoring and you will therefore be boosting your credit ranking by maintaining longer credit periods. There are measures that you can put in place to maximize on credit period including keeping your old credit cards active and avoiding opening unnecessary accounts. You can be using your old accounts for making automatic monthly payments.

There are still other things that are factored in when calculating credit ranking including new accounts requested or opened (10%) and quality of such accounts (10%). Using revolving accounts is considered more effective compared to taking installment packages like auto or home loans. The various categories of credit scores are:

  • Excellent credit- 720 to 850
  • Good credit- 690 to 719
  • Fair credit – 630 to 689
  • Bad credit- 300-629

You can always request for your report at any time but this may attract some small charges. Any inaccurate details should be corrected immediately since a poor score can result from errors made during reporting.

How does credit ranking affect my financing options?

In making lending decisions, a lender can decide to approve or reject your application based on your ranking. However, you will still be eligible for huge offers even with a tarnished credit report but your exact score can contribute to changes in interest rates and even repayment terms. Generally, you will stand to qualify for more financing options and stand to get competitive offers by maintaining an impressive credit score.

There are also loan providers who will ask for collateral when dealwith poor credit borrowers especially when giving out large amounts of cash. This is a move that is made to counter the risks of giving out financing to such high risk individuals. In such cases, the loan providers can also consider income source to confirm affordability.

 

How to Refinance Auto Loan with Bad Credit History

 

6 Ways to Refinance Auto Loan with Bad Credit History

 

If you are facing challenges sorting out auto loan repayments, you can now opt for refinancing and replace your existing debt. This can work to your advantage since your new debt can be availed at a relatively lower APR and a repayment plan that will be more affordable. Even with a low credit standing, you can still get approved for refinancing by sticking to the following steps:

  1. Check your credit file

In most cases, lenders will use your credit scoring to make important decisions like credit period to allow and applicable interest rate. It is therefore wise to scan through your credit report and confirm that the details provided are accurate. In case of any unclear entries, you should have them rectified before considering refinancing. This is a move that can result to significant changes on ranking.

  1. Clear outstanding payments

Before approving your application, most lenders will be interested on how you have been handling payments on the existing loan. You will therefore stand higher chances of qualifying if you have been making prompt payments. If not so, you should try to clear any unsettled payments before sending in your application. This should apply even to other debts that you may be having.

  1. Provide proof of income

The lenders will be highly interested on how you will be clearing your debt once your application goes through. You can easily convince them of receiving timely payments by providing proof of a steady monthly income. This should be enough to support the new debt and any other financial obligations. Some loan providers will be very specific on employment but there are others who will accept any other source of income.

  1. Consider different options

Obtaining auto refinancing from traditional lenders with poor ranking can be extremely challenging and this involves a very tedious application process. To boost your chances of qualifying, you should consider other alternatives like credit unions and private lenders. You should then ask for quotes from different sources to compare them for competitive interest rates and flexible repayment terms.

5.Considering loan modification

You can consider requesting for auto loan modification if you are not interested in refinancing your current debt or if your request is not approved. This is where you should approach your lender to have your current payments substituted for a new repayment plan that will be easy to stick to. You can also negotiate for any missed payments to be paid towards the end of the agreed credit period. Loan modification will help you to avoid missed payments or defaulting.

6.Using an auto refinance calculator

You can now use a car loan refinance calculator to estimate the monthly payments applicable to any offer you are considering. This will also help you understand the savings that you will be enjoying every month. There are some calculators that can give you an APR estimate based on the amount involved, the desired repayment period and your credit rating. All this is meant to help you make the best choices.