CLF loans
CLF loan menu

Getting Approved For a Loan If You Don’t Have Assets For Collateral

We find that there are consumers that come from all walks of life and have a variety of problems obtaining loans and mortgages. Our current applicant has a good credit rating, a relatively secure job (as much as any job can be secure these days), and he has skills that are transferable from employer to employer. He owns his own home and car. The car is paid for, but unfortunately it is an older model and not worth too much and therefore cannot be used for collateral for a loan.

He has a mortgage on his home. He does not have sufficient equity in the home to use as collateral either and therefore is faced with interest rates that are based on unsecured loan rates.  The loan is to cover some credit card debt for the total amount of $10,000. He does not have enough equity and will need to pay slightly higher interest rates, however these rates are substantially lower than what he would pay if he were to leave the debt on his credit card. The rates are at least 10 points higher and cost a great deal more on a monthly basis.

This situation is actually pretty common with many consumers not having the equity to use as collateral for loans that they wish to be approved for. For consumers that do have collateral, this means they can obtain lower interest rates in return for placing this collateral with the lender or signing it over to the lender. What this situation really means is that if the borrower for some reason cannot repay the loan, or does not repay the loan, the lender can sell the collateral to recover the remaining balance of the loan plus the cost of processing and selling the collateral. Before you offer collateral, consumers should always be sure that they can repay the loan based on the terms of the loan without ever defaulting on the loan.

We believe that this client can meet all of the obligations of this loan and will likely be approved for a loan, however the interest rate may be higher than he would like.

(Continued)


Tips For Staying On A Monthly Budget

Our newest applicants are on the right track in terms of managing their money and making sure they do not get themselves into a financial bind by spending more than they have on a home. They are looking for tips on staying on a monthly budget. The first step is to arrange for a mortgage with the largest down payment they can afford and the lowest interest rate they can find. This will help to ensure that their mortgage payments are as low as possible.

They have a good credit rating and should qualify for a relatively low interest rate mortgage for as long a term as they wish. They have taken the right steps by building up a large down payment. Even though they have lived with his wife’s parents for a year, this has allowed him to build up a large down payment, which is the first step in managing a monthly budget.

We also urge these applicants to estimate their monthly taxes and the utilities that will need to be paid. Adding up all of these figures will provide an estimate of the total monthly cost for their home including principle, interest, taxes, utility costs and maintenance costs.

The big unknown is what repairs will be required once they take possession of the home. We urge then and in fact it is required in many states to have a home inspection before they finalize the purchase. This inspection is extremely important to establish what repairs will be needed on the home. Since this is a foreclosure sale, the bank will not make any repairs. The best the customer can do is to negotiate the price down further to cover any identified repairs that may be needed.

We anticipate further discussion on this file since the sale of the home is no where near being finalized at this stage.

(Continued)


What To Do While You Wait To Be Discharged From Personal Bankruptcy

This particular applicant is not really an applicant for a loan or mortgage. He is looking for information about what he can do while he waits to be discharged from bankruptcy. These kinds of questions are a little bit out of the scope of what we normally deal with on this web site, however we can offer some suggestions as he awaits his discharge from bankruptcy.

His wife owns a store which he operates and which is also not part of the bankruptcy proceedings since he is declaring personal bankruptcy. He went through a difficult time due to a more expensive start up of his store than he had planned for and less revenue than planned. They decided to sacrifice their personal financial situation and keep the store going. As a result the store is now doing well and he has had to declare personal bankruptcy. While we could debate  whether this was the best strategy, it is never the less the circumstances he now finds himself in that he must deal with.

Bankruptcy discharge means that you are legally released from all debt covered under your bankruptcy. There are some debts that are not allowed to be included in a bankruptcy discharge. These include – child support, alimony, debt from fraud, court fines, student loans and restitution orders. Our applicant should plan to repay these items if they apply in his situation.

There are also different rules for people who are going through bankruptcy for the fist time vs. those that have declared bankruptcy multiple times. We do not know if this applies, so he should investigate this situation depending on which applies for his situation.

In some cases a bankruptcy discharge can be opposed and you may find yourself not receiving the discharge. For example if the discharge was caused by gambling, you did not pay the agreed surplus income, there was a viable proposal that was not filed, you refused counseling or there were unusual transactions prior to declaration of bankruptcy the discharge could be opposed by creditors. This applicant should confirm that these issues do not apply to his situation.

There are several types of discharge bankruptcy’s available. Our applicant should investigate whether they will qualify for an automatic discharge, order of absolute discharge, order of conditional discharge or order of suspended bankruptcy discharge.

Once he has investigated all of these issues, he can then make some decisions regarding what to do while you wait for bankruptcy discharge.

(Continued)


Need Debt Relief Program That Helps More Than It Hurts?

This client is in need of a debt relief program that in his words helps more than it hurts. In other words he is looking for a lower interest rate loan with a reasonable term that allows him to consolidate his credit card debt into one low interest loan with one monthly payment. He has six credit cards and has an overall balance of $20,000 on all of his credit cards. If he does not obtain debt relief soon, he will be paying over 21% in interest on the balance of each card which totals $20,000.

This client owns his own store and according to his application is doing just fine. They openly admit that they manage the stores cash flow situation much better than they do their own personal finances. This is actually not that uncommon for many people who find themselves needing some form of debt relief from multiple credit card debt situations.

As it turns out this client would have an excellent credit rating if it were not for his multiple credit cards and outstanding debt on these cards. He has an excellent record of always paying his bills on time and has a relatively small mortgage. Owning too many credit cards can ruin many consumers credit rating simply because they are exposed to a lot of potential debt that carries a high interest rate with large monthly payments if the balances are not paid in time.

We anticipate that this client should qualify for debt relief in the form of a relatively low interest rate loan. If he does cancel several credit card accounts this will improve his credit rating as well although it will take some time for his credit rating to reflect the lower number of credit cards.

(Continued)


$70,000 Loan For 2010 Kenworth Truck in Bakersfield, CA

This applicant is applying for a loan of $70,000 to help him close a deal on a 2010 Kenworh truck that he wants to purchase. He will be trading in an older model and this particular truck is a low mileage vehicle at an excellent price. This will be an upgrade for him with the addition of a sleeper cab which will allow him to branch out into longer haul contracts at some point.

He has a very good credit rating with no loans other than his current mortgage which is in good standing. He has no overdue credit card bills and no other loans. He makes sufficient money to handle both his current mortgage, taxes and the new payment on the truck if it is approved.

This client has also demonstrated very good money management abilities. He has fixed his salary at a specific amount and only draws this amount each year. The remaining money is set aside for major repairs if needed, and also to cover his salary during months when the income may be a bit low. He has been doing this sort of thing for the past 10 years which provides him with an excellent cash flow and allows him to meet his ongoing obligations and living expenses. This is a really good approach to follow.

We anticipate that he will be able to purchase this truck after being approved for this loan application. The lenders may need some more information from him to help substantiate the loan, however he has an excellent chance of being approved for this loan.

(Continued)


What Is A Truly Reasonable Interest Rate When You Have Bad Credit

This client is in a tough situation. he has a successful business which apparently is doing very well except that he has been hit with two calamities  which nearly bankrupted him and took every last cent he had. He obviously did not pay all his creditors at the time and as a result has a bad credit rating.

He wants to buy a home, but the interest rates are too high for him to afford due to his bad credit rating. Someone with excellent credit and a decent down payment can obtain a mortgage around 3% interest, while someone who has bad credit may pay an interest rate of 14% or even higher. We chose 14% to illustrate how big a difference the interest rate makes in a mortgage.

At 3% the monthly payment is $565.58, while at 14% the monthly payment is twice this payment at $1132.50. Many people might find this  shocking, however interest costs can add up quickly. Since this customer is obviously a knowledgeable business person, he understands the value of money and cash flow and how important it is to obtain a truly reasonable interest rate. For more information on the calculations see below.

He will be better off continuing to rent for awhile, saving up more cash for a larger down payment and setting up a fund within his company i.e. the restaurant for emergencies. With an emergency fund, he will not be impacted by any calamities that occur with the restaurant and he can continue to repair his credit rating. Taking this approach will save him a great deal of money in the long run and ensure that he can qualify for a much more reasonable interest rate saving him literally thousands of dollars over the life of his mortgage.

(Continued)


Is It Worth Damaging Your Credit Rating Further By Using A Debt Relief Program?

Our latest applicant is worried about the impact a debt relief program might have on his credit rating. It is already in bad shape with all of the credit cards that he has and the level of debt that he has compared to his income. There are several solutions to his issues, some might be worthwhile pursuing, however he is going to have some sort of impact on his credit rating. The question is how to minimize the impact.

He has a number of credit cards all max’d out to the limit. This alone is a negative impact on his rating. He really should have managed the situation better, but now the damage is done.

The best solution is to apply for and be approved for a consolidation loan at a lower interest rate which will improve his cash flow and as a result will pay less interest. By paying this loan off in full, he will also improve his rating.

Another approach is to apply for a debt relief program. The process involves negotiation with the lenders to come to agreement on a total amount that will be paid, which is less than the original total amount. Using a professional negotiator to assist you can be a benefit for some customers since they understand the process and have all of the negotiation techniques well understood.  Regardless of how you go about this it is important to always obtain all agreements in writing and have all parties sign off on the deal so there are no surprises.

In most cases there will be a negative impact on credit ratings since the lender is taking a haircut on the total amount that was originally owed to them. In addition the borrower may be required to come up with the new loan amount in one lump sum which can be difficult for many people.

If you plan to borrow money in the future, a damaged credit rating can make it difficult to obtain a loan and if you do, the interest rates may be high for a personal loan. Evaluate each of these carefully before making a decision.

(Continued)