Your credit score limits your options when it comes to borrowing money. Whether you had a streak of bad luck or perhaps just a streak of bad financial planning, your bad credit score can make it much harder to arrange a loan when you need one. It begs the question: what are the options for those who have bad credit but still need a loan?
It turns out there may be more options than you realize. Loans are made through many reputable companies willing to consider more than just your credit score when it comes to loans. In fact, some of these options for those with bad credit who need a loan might also help to repair your credit score over time so that you have more options for the next time you are caught in a financial situation and need some extra funds.
It’s important to remember that while there are options for those who need a bad credit loan, there are conditions that may be less than ideal. Interest rates will be higher for those with bad credit. Loan amounts may be much smaller. The key to finding options for those with bad credit who need a loan is to do your research. Find the lenders. See the terms. Put the resources available on the internet to work for you. Here are a few loan options for bad credit to consider.
Loan Options for Those with Bad Credit
You have options if you need a loan, and many types of loans can be arranged online with minimal hassles.
The personal loan many would-be borrowers are seeking is an unsecured loan. You are given a set amount of money in return for a promise to repay the money according to the terms set in the contract. You do not have to put anything up for collateral on an unsecured loan, which means the bank or lender is taking a gamble on your ability to repay the loan.
A secured loan is risky for the lender. The lender will then pass that risk on to you in the form of higher interest rates. You may also be very limited in the amount the lender is willing to let you borrow. Among the loan options for those with bad credit, an unsecured loan may be limited in size with higher interest rates.
In an unsecured loan, the bank takes a gamble on you repaying the money. A secured loan moves the risk to you. In a secured loan, you tie something of value to the loan. This might be the title of your car or truck, your motorcycle, valuables like jewelry or firearms or anything else the lender is willing to accept as collateral.
You arrange the collateral for the loan, and then the lender gives you the money with the understanding that if you don’t repay the money according to the terms of the loan, the lender will take possession of the collateral. In an auto loan, for example, you use your car as the basis of your loan. If you fail to repay the loan, the lender will take your car and sell it to recoup their loss.
Because secured loans are safer for the borrower, they may have lower interest rates for borrowers with bad credit. Other lenders may keep interest rates high on the loan in spite of the collateral. This is where shopping around for bad credit loan options can be so valuable – the difference between lenders can be hundreds or even thousands of dollars in interest.
Traditionally loans were done using banks. If you happened to have a family member or friend with extra cash, you might arrange a loan from that person, often with a bit of interest to make it worth their while. With the internet making it easier than ever to reach others on a global scale, many individuals with extra funds are loaning funds to peers, much like a friend or family member might.
A peer-to-peer loan is arranged through a website dedicated to peer lending. You apply for the loan – either secured or unsecured – through the peer lending website. The site then determines if there are individuals on the other side of the table willing to let you borrow their money in return for interest payments.
Because you are dealing with individuals and entities other than traditional banks, you may find much lower interest rates, higher loan amounts and a bit more flexibility in borrowing terms. The loans may be structured differently as well as there is little overhead in this loan option for those borrowing with bad credit.
If you have a regular paycheck, you may be able to arrange a payday loan using your paycheck as evidence that you can repay the short term loan. There are many different arrangements for payday loans, and they often have fast approval processes which can help get cash in your hands quickly.
A payday loan is borrowing against your own income, which means the amount available to borrow will be limited by the amount of money you earn. Payday loans can have high interest rates as well, but rates will vary by lenders, so it is important to compare the offers and terms across the industry to be sure you’re finding the best arrangement.
Understanding Your Loan Options with Bad Credit
Bad credit doesn’t mean the same thing to every lender. For some, any credit score below 640 is bad. For others bad credit is a score below 600. In most cases, however, the criteria for loan options for those with bad credit gets more rigid if your credit score falls below 640.
Even if your credit score is fall below 640, however, you still have loan options if you need to borrow money. In order to help you and yours through a rough patch, you may just have to take a bit more time and effort to look through and consider the options for those who have bad credit but need a loan. The lenders are there. Your job is to find the option that works best in your unique situation.