If you or someone you know have tried to get a loan within the past 7 to 10 years, it has been extremely difficult. It has been hard primarily due to the banking crisis that the entire country was hit with. The problem was so devastating that some people still have not gotten back on their feet.
As a retiree, I’m able to watch the news looking for material about financial matters that affect the regular guy like you and me. In doing so, I try to alert each of you to the new procedures that are coming down the road by the different financial organizations that will have an impact on you and your family.
There is one situation that has recently come up and that is the market of lending money to the small guy is opening up again. These loans are slated primarily for people who have lower credit scores. These customers have been frozen out from borrowing funds which made things worst.
They are claiming that it’s not another sub-prime program in disguise to trick the public.
This is a special group of lending firms( non-banks) which will be doing this kind of business. They claim that the loan process will be quicker and more efficient than the previous procedures.
These loans will be restricted to the size of under $750K. They have data showing that most people in the country want to borrow under $400K and they have been unable to do so.
Due to the new regulations and sanctions placed on the bigger banks, they have, for the most part, been excluded from servicing customers in this dollar range. This is because of the scandals that were discovered in handling the mortgage underwriting business that caused the loan problem.
These specialized lenders claim that there are over 25% of the country, has a need some in form of funding and they want to help them.
This is not because these sweet organizations have suddenly got a heart and want to help these millions of people to get back on their feet. They have discovered that there is a financial need that is not being served and they want to open their arms to help.
You don’t have to be a rocket scientist to understand their motive, it’s again about the dollars.
The families that have credit scores below 600 have been blocked out of the market of receiving financing as they were considered too high risk. Having credit scores under 600 is the benchmark that banks use to reject a request for loans.
However, these new lenders are non-banking institutions are called mid-size financial companies. And they are getting the government’s approval to conduct this type of business. In receiving the government’s permission, it’s going to attract more customers to take out these loans.
As a result, many of you will be receiving solicitations in the mail or through some form of digital notice, email, text, and etc, telling you that money is now available to you.
This is a warning to be careful as these loans will not be the sweetheart deals. They will carry a higher interest rate, you will have to put down a larger deposit, and they may want you to pay your mortgage using an “ACH” process. This means they want to withdraw their payments from your bank electronically in order to get the loan approval. This is a scary arrangement to me so you have to be on special alert.
Some people may not mine as long as they get the loan. But I’m telling you to be careful before signing those documents. I would make sure to check with your legal representative and not your Uncle Billy before you do so.
I was once burnt years ago by an organization that did the same to me. It took me years to get out of that loan. It was an easy loan to get because I thought it was a fixed loan. It was a fixed loan in the beginning but it had an adjustable feature that kicked in later which cost me dearly. I recall that transaction very well because it was painful.
In the end, I’m not telling you that you shouldn’t borrow the funds if you need it. However, please be very careful in signing those documents no matter how sweet the terms are for the loan.
So if you plan on taking out one of these loans, I hope that you remember this article. The advice that I’m passing along to each of you is meant to help you and not hurt you. Be very careful.