What to Look For: An A-Z List of Loans for Those with Bad Credit
It often means those with bad credit scores find it difficult to successfully apply for bad credit loans. The problem is that these are often the people who need access to additional funds the most.
Thankfully, there are solutions available. Whether you’re thinking of obtaining a mortgage or starting your own company, there are loans for those with bad credit available.
If you’re struggling to get a line of credit, keep reading. We’re sharing with you the best credit loans for people with bad credit in 2019.
Tips for Finding Loans for Those With Bad Credit
Besides having extra funds available to you at a time when you need it the most, if you manage your loan well, it’s a smart way to build up your credit score.
But you need to make sure you find a trustworthy company to work with. You also need to make sure you even will qualify for a loan.
Here are a few tips to follow when searching for loans for people with poor credit.
Check Out Online Reviews
Start by taking a look at any online reviews available. The Better Business Bureau is a good place to start.
Don’t be alarmed if you find a few negative reviews. That’s to be expected, especially if the person leaving the review was denied a loan. However, if there are mostly positive reviews left, it’s a good sign you’ve found a reputable company.
Make Sure the Company Explains Their Offers
Take a look at what each company is offering. Avoid lenders who won’t state what they offer.
Search for Higher Limits
Search for limits higher than $1,000. This is the normal limit for a payday loan online, which will carry a much higher interest rate than other loans. If your credit score is average or better, you should look for a higher credit limit, as it will also carry a lower interest rate.
Watch Out for High APRs
Pay attention to the annual percentage rates (APRs). The lower your credit score, the higher the interest rate is. However, the best lenders are still willing to offer competitive rates.
Find Lenders Offering Flexible Terms
Look for lenders who offer flexible terms. Personal loans with bad credit require fast repayment. You don’t want to end up locked into a fixed repayment plan that extends over a long period.
There are Different Types of Loans Available
Remember that there are different types of loans available to you. Make sure you understand the type of loan you’re applying for and it fits in with your needs and situation so you don’t end up in a worse financial position than you’re already in.
Unsecured Loans for Bad Credit
An unsecured loan for bad credit is a personal loan no credit check that’s approved without needing to provide collateral to obtain the loan. They’re also known as signature loans since your signature is basically the only collateral required.
For an unsecured loan, you qualify for the loan based on your credit history and income.
An unsecured loan is helpful because if you stop making payments on the loan, no lender has the ability to take away any of your physical assets such as your home or car.
And there are several types of unsecured bad credit loans.
Unsecured debt can come in the form of a credit card. While we don’t typically think of a credit card as a loan, when you use your card, you are borrowing money.
Personal loans with bad credit are another possibility. They are usually available from credit unions, banks, and online lenders.
Once approved, you can use them for any purpose you wish.
Many student loans are also unsecured. Most loans coming through the Department of Education are unsecured.
How to Get Approved if You Don’t Qualify
There are a few extra steps you can take to obtain an unsecured loan if you have bad credit. You can ask someone to act as a co-signer. However, that leaves the co-signer on the hook if you stop making payments.
You can try pledging some sort of collateral. But if you can’t continue making payments, you may lose the assets you put up as collateral.
You can also borrow less money which results in lower monthly payments.
Most payday loans are a short-term, high-cost loan where someone borrows $500 or less. These loans are called “payday loans” because they’re usually due on your next payday.
However, before you apply for this type of loan, check with your state to see if they permit payday loans. Not all states do. And some states regulate payday loans. Check with your state’s bank regulator to see what the laws are regarding payday loans.
Those states that do permit payday loans set a maximum amount for loan fees which typically range between $10 and $30 for every $100 borrowed. A typical two-week payday loan with a $15 fee on $100 equates to an APR of nearly 400%.
To pay back the loan, you’re usually required to write a post-dated check for the entire balance, including any fees. You can also authorize the lender to debit the funds electronically from your bank, prepaid card account or credit union.
If you don’t pay back your loan, the lender is able to cash your check or withdraw the funds electronically from your account.
Personal Installment Loans
A personal installment loan is really any type of loan that is repaid with by making payments that are regularly scheduled. Each payment you make includes repaying a portion of the principal amount you borrowed.
It also includes paying the interest on the debt. The variables that determine how much you pay in installments depends on the amount of the loan, the interest rate, and the length of the loan.
While mortgage rate installment loans often come with a variable interest rate, nearly every other type of loan, including personal installment loans have a fixed interest rate. Therefore, the amount that’s owed for each installment should be the same, making it easier to stick to a budget in order to pay back the loan on time
Personal loans do not require collateral but mortgage and title loans do. Personal loans are therefore based on your credit score and your current income and assets.
Loans without collateral always have higher interest rates as a result.
Peer-to-peer (P2P) loans are a newer way to borrow money. However, while they’re newer, they’re just as reliable as other loans available.
Peer-to-peer loans are usually found on peer-to-peer lending sites. These sites let prospective borrowers get loans for individuals willing to lend them money rather than a bank or another type of financial institution.
P2P loans are unsecured.
The Pros and Cons of P2P Loans
P2P loans for people with bad credit are increasing in popularity but there are requirements. Most will take a look at your credit history, employment history, and a few other factors. Often the qualifications are rather strict.
You’ll also need to raise loan funds from various borrowers and it can take two weeks or longer to receive your funds.
But if you qualify for a loan, often the interest rates are as low as 5.24%. However, rates can also be as high as 31.7%. However, the potential fees are often lower than other types of loans for people with bad credit.
You can even explain to your potential investors why your credit is low and you can borrow a higher amount than you normally could when trying to obtain a traditional bank loan.
A Home equity line of credit (HELOC) loan is a loan you can use if you own a home and have equity in it. To qualify for a HELOC you need to have a loan-to-value ratio of 80% or below.
Lenders also look for strong employment histories and a low debt-to-income ratio.
Pros and Cons of a HELOC
HELOC loans for people with bad credit are great because there’s flexibility in how you use your money. And it comes with a lower APR than most credit cards. If you apply for an adjustable-rate HELOC, you may receive an even lower rate.
However, you must pay all the closing costs. And your home acts as your collateral, meaning if you can’t make payments, you may lose your home.
The bank can also cancel your line of credit and if you don’t use your line of credit immediately, you may face additional fees.
Just as there are unsecured loans for people with bad credit, there are secured loans available as well. They act in a similar way as a HELOC in that you put up something you own to act as collateral.
However, if you have valuable assets such as a home or car, getting a secured loan is sometimes easier for someone with poor credit. The benefit is secured loans is that the loan is based on the value of the asset, instead of your credit score. So, if you have a really bad credit score or no credit score at all, these are perfect no credit check loans that you can take out and build your credit score.
The Pros and Cons of Secured Loans
Lower interest rates are often possible for people with qualify for a secured loan.
Also, the repayment period for a secured loan is longer. This is often helpful for people who need additional time to earn money to pay back their loans.
However, a longer term can also result in you getting stuck in debt.
Getting a Loan From a Friend or Family Member
While getting a loan from a friend or family member seems easy, it could put your relationship in jeopardy. Only ask if you’re out of options and you know you can pay them back.
It’s a smart idea to draft a loan agreement that clearly spells out the terms of the loan. That includes how much interest you’ll be charged, the number and amount of payments, and the length of the loan.
Doing so will prevent a lot of future problems, which can include legal action along with severed relationships.
Pros and Cons of Getting a Loan From People You Know
There are some great advantages to not going through a bank or other lending company to obtain money. First, you won’t be denied based on your credit score.
And you won’t have to wait to receive the funds. It’s also possible to get a loan with no interest rate or a much lower rate than any other entity would give you. You also have more flexibility paying back the loan.
But then again, you may get turned down from those you know. And in some cases, even asking can potentially harm a relationship.
Most people don’t have a ton of money they can part with so the loan amount is often smaller than going through other sources.
Credit unions are easier to obtain a loan from than banks because they have more relaxed standards. It’s also easy to join a credit union.
And because credit unions are not-for-profit they can offer loans and other financial services at cheaper rates than banks can.
Pros and Cons of a Credit Union Loan
Along with relaxed standards, there are also fewer penalties and fees associated with your loan than what is offered at a traditional bank. And they offer unsecured loans for people with bad credit.
However, both your credit score and the type of loan you take out will limit how much you can borrow. And your unsecured personal loans often have shorter loan periods.
Find the Best Loan for You
Most people in need of money need it fast. But feeling rushed and scared can force people into making bad decisions.
Those bad decisions can lead you to a worse financial place than you are in now. Do your homework first so you know what you’re getting yourself into.
It’s important to gather the information most lending companies require before applying. You should also do your homework so you find a credible company who can provide you with a loan that helps you out rather than increasing your debt load.
We can help.
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