Many a borrower fear subprime loans because of its connotation with the recent housing crisis. The fear may be because this type of loan has higher interest rates compared to traditional ones, thus requiring higher fees.
It cannot be denied that subprime loans have its setbacks. But take note that all loans have its disadvantages. And in any loan, subprimes included, research and informed planning is key to reaping the loan’s pros.
Subprime loans are not for everyone. Yet, there are those who will benefit from these loans the most. They are the ones who would not qualify for a conventional loan. A conventional loan typically has standard requirements to meet such as verification on income, credit scores and assets. If someone fails to establish some or all of these, a lender may just refer you to someone else or worse, deny your application.
You don’t have to take no for an answer. You can skip the income documentation or you may have a bad credit, with subprime you can get the financing you need. This loan type is commonly used to pay for mortgage, purchase a home or pay off an existing debt. Whichever reason you are getting it for, study your circumstances. Read on and learn about how subprimes can work for you.
Who benefits from subprime loans? Check out this list and you may find yourself fit in any of the following:
Those Who are Self-Employed and Non-Traditional Income Borrowers
These kinds of borrowers may face challenges in income verification. Thus, to avoid going through the gruesome process of documenting and proving one’s income and assets, a subprime loan is a better way to go. One type of subprime loan is the stated income loan. Here, you only have to “state” as to how much you earn and the lender will take your word for it. You need not provide any document to prove what you have declared.
Those with Bad Credit
Let’s face it, credit score means everything when you apply for a conventional loan. Subprimes are best for those who have poor credit standing. To other lenders, a credit score below 620 may mean a denial. This, however, should not mean the final nail to a coffin. Subprime lenders will approve you for a loan even if your credit is in poor shape. The terms and interest may not be as flattering as it is for the prime ones, but it helps you get started.
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Those Who Want to Repair Their Credit Scores
When you have unflattering credit scores, it is a must to do some improvements by paying off debts. Getting prime loan lenders to finance may, unfortunately, not be a viable option. In the desire to avoid having their credit scores dive further, borrowers use subprime loans to pay off existing debts. By doing so, it allows one to concentrate unto paying the subprime loan itself. With on-time and full payments, this course plan can be a game changer and can put you on a better credit standing.
Those Who Don’t Want to Reveal Their Assets
Now, There are those who do not want to reveal their assets for a number of reasons. One common reason is to keep things confidential. Unfortunately, to get a good loan with prime lenders, one has to declare all of his/her assets and provide documentation to each. Sounds like too much work, doesn’t it?. Subprimes lenders, on the other hand, won’t go nosy over your hidden assets. In fact, they care less. As long as you agree with the interest rates and terms, you’re good to go.
Summing It Up
This is just a short list of persons who can benefit from a subprime loan. If you are one or a combination of the persons mentioned above, it’s time that you consider a subprime loan. If you think you don’t fit into any of the aforementioned, just remember the three advantages of this loan: no income verification, no assets verification, no need for a good credit standing.
And while it is good to think positively, it is also wise to look over the cons of having such a loan. This way, you are able to weigh things and find out if a subprime loan truly benefits you. It may be a risk to take but being prepared and well-informed can help you decide. For more info on subprimes, we have an array of articles to assist you in your research. To get firsthand information, it is best to talk to a subprime lender yourself.