Purchasing A Property With A Second Chance Loan
Are you interested in purchasing a home, but concerned that you won’t be able to qualify for a mortgage due to a poor credit score or the inability to afford a down payment? Even if this is the case, you still may be able to become a homeowner with a second chance loan. If you are located in the areas of Stamford, Norwalk, or Fairfield, Connecticut, and want to better understand your home financing options, Prosper First Funding can work with you. Continue reading to learn more about purchasing a home using a second chance loan.
What Are Second Chance Loans?
Purchasing a home is a great investment, however, it is also a major financial undertaking. If you have had a previous history of credit issues, it could pose a major obstacle for mortgage qualification, however, it doesn’t make it impossible. Second chance loans are intended for borrowers that have poor credit history, and would more than likely not qualify for a traditional mortgage. A second chance loan is classified as a type of subprime lending that charges borrowers a sustainably higher interest rate than what is typically charged to borrowers deemed less of a credit risk, and is geared towards individuals who have had times of financial instability or lower credit scores and are looking to rebuild their credit.
How Do Second Chance Loans Work?
A second chance loan is typically intended to be used as a short-term financing and is offered primarily by lenders that work in the subprime market. A borrower that qualifies for a second chance loan can obtain funds and if they continue to make timely payments, they can improve their credit history. Once a borrower is able to adequately improve their credit score, they can then apply for a new loan with better rates and terms that can be used to help repay the second chance loan. There is also another type of second chance loan that has very short terms and is usually for lower amounts of money, and is required to be repaid in full at the end of that shorter term.
What Are The Advantages And Disadvantages Of A Second Chance Loan?
Although second chance loans can be beneficial for some, they may not make sense for others. Some advantages include: they allow financing for people who may not typically qualify for a home loan, they do not have any fees up front, if payments are made on time it can build up a borrower’s credit, and the money can be used for any purpose. Some downsides include significantly high interest rates that will result in paying more for the loan in the long run, strict penalties if payments are not made, a possibility of hidden transaction fees, and a repayment period that is not negotiable.
If you want to learn more about a second chance loan in Stamford, Norwalk, or Fairfield, Connecticut, contact Prosper First Funding Corporation for a consultation.