One of the challenges of having been through a period of financial difficulty, is that it can make it extremely difficult to borrow funds or secure new loans when you need them in the future. A weak credit score may mean that you’ll be subject to additional fees and charges, or possibly have your loan application rejected outright.
If your credit history is a bit problematic, and traditional sources of finance aren’t open to you, then it might be necessary to call on your family and friends.
Most people are reluctant to mix business with family, but if you have family or friends who are in a position to help you with some funds, then this might need to be the time that you draw down on those favours.
An important step is to agree to the specific terms of the loan that you’re taking. Don’t leave the details vague – make sure everyone is clear on how much you are borrowing, when you will pay it back, and any interest that might need to be paid.
Write down what’s been agreed in relation to the loan, it needs to be more than a handshake agreement. Over time, people forget what was said, or may possibly have interpreted the conversation differently. Put everything in writing – it will help avoid any confusion down the track.
Rather than taking a cash loan from family or friends, ask them to consider co-signing your loan application to a bank. There are still significant risks involved for your family or friends, but it will enable you to access the funds you need from a bank or financial institution. It’s also important to consider alternative financial institutions such as credit unions or online lenders, as they have a more lenient view of your past credit history and offer specialist products such as bad credit loans.