Method 1Getting a Loan from a Friend or Family Member
- Find someone to borrow from. If you have a friend or family member who is willing to loan you some money, this may be your best option, as someone you know is more likely to loan you money on flexible terms and/or at a better rate.
- Agree to terms. Make an agreement with your friend or family member about how much they are willing to loan you and their expectations about repayment, including any possible interest.
- To ensure your relationship isn't harmed by this transaction, make sure to be open and honest with the creditor about your circumstances and when you expect to be able to pay them back.
- Get it in writing. It's a good idea to put your agreement in writing. This way, there is no conflict later about what the terms of the agreement were.
- The lender may ask you to sign a promissory note, and may even want to get it notarized to bolster its legal standing.
- Treat the terms of a loan like this just as seriously as you would a bank loan.
- Ask about cosigning. If you need to borrow a larger amount than any of your friends or family have on hand or are willing to loan you, you may want to consider asking them to cosign on a bank loan.
- If the individual you have asked to cosign the loan has better credit than you do, you may be able to get a much better rate if they also sign the loan.
- Keep in mind that if you fall behind on the payments of your loan, your friend or family member's credit score will be negatively impacted, possibly severely so. Don't take out a loan with someone else's name on it that you can't afford to pay back.
- Your specific rate in this case can vary based on your family member of friend's credit score. Consult an online loan repayment calculator to determine your payments and repayment schedule.
Method 2Getting a Loan from a Credit Union
- Find a local credit union. Credit unions are small, local banks that are owned by members rather than shareholders.
- Because of this business model, credit unions tend to have lower fees and a different customer service model that evaluates loan applications based on more than just a credit score.
- If your credit is poor, the rate will still be high, but not as high as it would likely be at a large bank.
- Open an account. Because credit unions are member-owned, you must become a member and be eligible for a loan.
- Opening an account at a credit union is the same as opening an account at any bank. Bring some cash and identification and a banker will help you set up a checking and/or savings account.
- Apply for a loan. Talk with a banker at the credit union about your eligibility for a loan, and fill out the necessary paperwork.
- Because of the more personal approach taken by credit unions, the banker you talk to will be more likely to take into consideration your individual circumstances when applying for a loan. Even if a large bank has denied your loan application, a credit union may approve it.
- Nonetheless, you should not expect to receive a loan under the same terms and conditions as you would if your credit was good: bad credit will still mean that any funds you receive will only be granted at a high interest rate. This is because the bank is taking a greater risk on your loan than on a loan to someone with a better credit score.
- Your specific rate in this case can vary based on the loan offer your credit union makes. Consult an online loan repayment calculator to determine your payments and repayment schedule.
MoneySense is a Filipino personal finance magazine published by MoneyTree Publishing Corp.
MoneySense is written for middle and upper-middle income readers who want to know about the best ways to earn, save, spend, borrow, invest, and protect their money.
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