Loan Options for Those with Bad Credit
Getting a loan can be incredibly challenging if you have bad credit. Lenders view your credit score as a snapshot of your financial resources and prudence, equating a bad credit score with someone who doesn’t take care of their finances well. Because of this, they see those with bad credit as riskier borrowers and so they are less likely to lend to them. Fortunately, there are several options for those who want loans but have bad credit. Keep reading to see which would work best for you.
Banks and lenders offer personal loan, and you are expected to pay in installments over a specified period. You can get an unsecured loan if you have good credit and financial standing, but secured loans are the most common option for those with bad credit.
A secured loan means you have to put up collateral for the amount borrowed. Secured personal loans for those with bad credit also typically have higher interest rates. These loans are often made for larger amounts, but they have significantly longer repayment periods compared to other loans for those with bad credit.
Payday lenders do not look at your credit score when deciding whether to lend to you or not. Some online lenders will also not meet you in person but instead, vary according to the information you provide them.
The main advantage of a payday loan is that they are dispersed very fast. When seeking a payday advance at Loan Express, for example, the cash is disbursed immediately after your application is approved. There are no lines, no questions, and no managers to deal with.
The amount you can get through a lender is typically limited to about £1500; but the amount you get will be higher or lower depending on the lender you go to. Also, some lenders will charge high interest rates for these loans, and you are expected to pay back the borrowed amount on your next payday, hence the name.
You will see these called car title loans in some parts of the world such as the USA. These are typically short-term loans that can be a good option for those with a low credit score. These loans are easy to secure because the borrower has to put up their car as collateral.
You need to repay these loans in 30 days; but the lender and borrower can agree on how long the repayment period will be. They are also typically written for less than the value of the car; usually up to 75% depending on the car’s make and model.
A serious downside of these types of loans is that their APR is quite high; and it can be much higher if you default. Also, the lender can repossess and sell or auction your car if you are unable to pay. This is why it is important to consider things carefully before going this route.
If you have bad credit, you now know of three types of loans you can get. Just ensure that you read the fine print, understand the terms completely and have a plan for repaying whatever you borrow.