How to Borrow Money
If You Don’t Have Collateral
Despite the fact that banks are highly vocal about their woes of people going bankrupt and not paying them back, banks are more aggressive than ever regarding giving people personal loans and lines of credit. The thing that you want to do is to begin to build these lines of credit long before you have a business opportunity in your lap.
The fact is that unless you already have excellent credit and accounts open, it’s hard to quickly get some large loans. The best kind of loans that you will want are personal unsecured loans. Your credit cards are personal unsecured loans. You can march down to your bank and get a cash advance against them.
You can also have other open lines of unsecured credit. They can be with your local banks or lending institutions anywhere. The credit game has changed over the last recent years. Previously, there was more of a chance for your personal circumstances to outweigh other negative items that are on your report.
However, these days the big thing that all lenders look at is your credit score otherwise known as your beacon score. If you want to obtain loans then you need to understand a little bit about how this scoring system works. The truth of the matter is that it’s questionable at least in my mind if anyone really fully knows how they work. But here is a generalized explanation if you weren’t aware of it:
There are values assigned for all the different variables such as your:
- Income
- Repayment History
- Amount of Your Total Credit Lines
- Amount of Debt Vs. Total Credit Lines
- Type of Residence
- Years at Residence
- And others
A computer model then calculates the all of these variables by assigning weights and a credit score is created. There are three major credit reporting bureaus. To find them, all you need to do is go online and key in on any search engine, “credit reports”.
The first step toward building your credit is to access your report from all three bureaus. Today, you can conveniently do it all online with a “three-for-one” report order.
You Can Improve Your Credit Score
Let’s get rid of some of the myths of credit. Anyone out there who advertises that they can magically get rid of negative items is lying. However, there are a number of things that can be done to try and get items removed.
You can do anything a credit consulting service offers to do. That being said, if you have the money to spend and not the time, there’s nothing inherently wrong with hiring someone else to do it as it’s basically clerical work.
But, first let’s decide how much work your credit score needs:
- If your score is 700+ then you are in very good shape. You are considered an excellent credit risk and will be offered the best deals…low rates, no fees, no down payments required, etc. This is where you’d like your credit to be.
- If your credit score is between 650 and 700, then your credit isn’t too bad...especially if it’s closer to the 700. You’ll be able to get credit cards, other unsecured lines of credit. You’ll be given decent rates and terms, but not the best. If your score is here you should make some effort to improve it although it won’t paralyze your ability to obtain loans to fund your business deals.
- If your score is under 650 your credit score is lousy. If you can get credit at all it will be with high interest rates, large down payments, big annual fees, etc.
Really, no matter where your credit score is unless you currently have the ability to go out tomorrow and borrow $250,000 on just your signature without anyone needing to approve or authorize anything, then you could use to improve your credit.
Let’s face it. If you can go out and just get $250,000 you’ve got a lot of freedom to make any business deal that you see fit.
If you have some credit, here’s the fastest way to get those credit limits increased and get more of them.
Start borrowing against the limits almost to the maximum. But...and this is a huge point: DON’T SPEND THE MONEY! Take the money you borrowed and put it in the bank where it can collect a little interest to offset any interest charges you might accrue.
Now, if you do have good credit already, then you won’t get hit with much interest charges because more favorable credit card terms don’t charge interest on the balance if the total balance is paid off in full at the end of the month. Either way, that’s what you do. Worst comes to worst, you have to invest a little money on interest for your future.
Now, start doing the same thing on your different lines of credit. Each month you borrow large sums of money and pay them back on time and in full. Before you know it, you’ll be getting credit line increases offered to you and other lenders will be pounding on your door. Your credit score will go up.
If You Have Little to No Credit
Don’t fret. Even if you don’t have any credit, you can get in on this game too. What you will do is start your loans with what’s called secured loans. There are plenty of credit card issuers (banks) that offer them and you can also get personal loans at your local banks with secured loans. Think about it from the point of view of the bank.
Why in the world wouldn’t they want to give you a loan if the loan is fully collateralized with cash sitting in an account in their bank? They’re happy to do it. But, it isn’t reported on your credit report as a secured loan…at least not yet, although I somewhat expect that to change when enough people catch on to this plan.
There is no reason you can’t do this. Let’s say that you are really hurting for money and don’t have even $2500 to throw into a collateral account where you won’t be able to touch it. Then, get someone you know to give you the loan. You can guarantee to pay them back immediately. Here’s how it works:
1. Mr. X gives you a loan for $2500. 2. You put it into the bank as security for the loan. 3. The bank gives you a $2500 loan. 4. You pay back the loan to Mr. X. 5. Now, you pay off the loan to the bank. 6. When you pay off the loan, you now have credit and a forced savings of $2500.
As your credit increases, you’ll be able to start operating like the people who have some credit…just taking out loans and paying them back. Within as little time as six months to a year you can build up substantial lines of credit. And once you’ve done that, if that amazing business deal comes along and you don’t have the cash or other assets to convert to cash and you are sure you want to take the risk, then you’ll have the ability to do it.
Building huge unsecured credit lines is just one of the ways “street smart” business people take care of business to increase their wealth and live the good life. For more information on “Street Smart Business,” follow this link: