Loan Mechanisms – The Options for a Bad Credit Borrower

1. Loan Mechanisms – The Options for a Bad Credit Borrower The sector of banking and finance is a sector where everyone wants to avoid everyone else. The bankers want to avoid having to deal with customers, the investors want to avoid having to deal with bankers and the bank customers have no idea where the bank is getting their money from and these entire complications end up making life difficult for the common folk. Especially for people who have had certain misfortunes that landed them in bad credit zones, it is particularly hard to obtain a loan no matter how perfect their documentation is or how serious they are. In this circumstance, is it not wrong to leave such a customer on the road, with nothing in his hands? Bad credit is not entirely his fault, but it seems that it is a strong criterion to gauge the capability of a customer to pay back the money he loaned. This strict banking arrangement does not create a friendly atmosphere for those who are willing to reboot their lives with starting something new –and the banks just won’t help. This is where the alternative loan mechanisms come into picture. One mechanism of acquiring loans for your start-up business after getting thrown out of the bank is peer to peer lending. It is the mechanism of lending where the banking entity is completely removed from the money flow loop. Borrowers directly get in touch with investors and explain their requirements to them. They explain each detail and plan for their start-up business to get the investor interested in the deal. If the investor is happy, a deal is cracked and papers get signed upon agreed terms. The borrower gets his funds and the investor his wish. Personal finance management becomes a little more convenient when easy loans are available for funding the ventures of entrepreneurs. The next mode of “loaning” money is the crowdfunding method. Crowdfunding is basically a money accumulation mechanism which differs from a peer to peer arrangement in that crowdfunding sees many lenders for one venture, whereas the former may have only one or two investors. A crowdfunder activity is something that has a small business venture in need of money put up for the investors to see. The interested investors and other parties then pool their money and lend it to the venture over the internet. Thus, the kick-start money has been accumulated through crowdfunding. This is also a great platform to publicize the products of your venture to the world so that it generates additional business. The crowdfunding websites do not charge anything and provide a huge gathering of investors and competitors on the same platform. Although this is an excellent way to acquire funds to run your business, however, it may carry the risk of exposing your business idea and model to the world on the site. It may be the answer to fulfilling the finance requirements of your firm to prevent it from sinking, however, in the long run, it your business that must generate revenue somehow. To get more crowdfunding news, visit Moneysedge.com.