If you are looking for the best way to get a loan but you have bad credit, chances are you make think you are out of options. We go over some of the craftiest ways to get approved for a loan without jumping through hoops for it.
Anybody who’s ever needed a loan knows that there are many options out there if you have good credit.
For those with bad credit, the number of options drops significantly. However, there is good news.
We’ve gathered a few ways that you can secure a loan with bad credit, including the best way to get a loan.
Keep reading to find out what you can do if you’ve got bad credit and are looking for a way to get a loan.
Payday Loan
One of the easiest ways to get some fast cash with bad credit is through a payday loan. This type of loan allows you to borrow a small amount of money that you will be expected to pay back within a paycheck or two.
They’re easy because they only have four requirements:
- Be at least 18 years old
- Have a checking account
- Be able to prove your income
- Provide a valid phone number
Unfortunately, these also come with extremely high-interest rates and you’re very limited in how much you can borrow.
Because of the drawbacks of this type of loan, you should only get one if you have no other options and are facing a financial emergency.
Secured Loan
To get a secured loan, you have to be prepared to risk something valuable to you in exchange for receiving the loan. A mortgage is an example of a secured loan since the bank is allowed to sell your house if you’re not making payments.
These loans are low-risk for the lender because they know they can make their money back if you’re not able to pay by selling whatever you put up for collateral.
Because there is a lower risk for the lender, they’re easier to get even with bad credit. They’re also beneficial to you as you generally get a lower interest rate. However, you also have to have something valuable to get approved.
Here are a few other examples of secured loans:
Title Loan
This is a type of secured loan in which you use your car as collateral. It’s an option if you have bad credit, but it’s certainly not the best.
These are generally small loans, as lenders will rarely offer you more than half the value of the vehicle. Plus, they come with relatively high interest rates and you could lose your car if you’re not able to pay back the loan.
Another potential drawback is that you may not be able to get a title loan if you still owe money on your car through a car loan.
However, if you have a car that is paid off and you know you’ll be able to pay back the loan quickly, then this could be the right loan for you.
Savings-Secured Loan
If you’ve got some money in a savings or checking account that you don’t want to touch, you can get a loan for up to 95% of that amount. This type of loan has a low interest rates because the lender is guaranteed payment.
For the duration of the loan, you won’t be able to touch the money in that account. If something happens and you aren’t able to pay, the lender recoups their loss by taking it directly from your account.
This type of loan works well for someone with bad credit that has some money saved up for a rainy day.
Unsecured Personal Loan
If your credit isn’t too bad, you may be able to get an unsecured personal loan. This is any loan where you’re not risking physical property.
Since these come with a higher risk to the lender who will have to take legal action if you get behind on payments, they are difficult to get with very poor credit. They also come with higher interest rates.
The benefit of an unsecured loan is that there’s no risk of losing your house or anything valuable if you’re not able to pay it back on time. On the other hand, you also run the risk of further damaging your credit by faulting on the loan.
Here are a couple more types of unsecured loans to consider:
Credit Cards
One type of unsecured loan that many people don’t realize they can use is credit cards. You have to be extremely careful when using credit cards to borrow money as it’s one of the fastest ways to get yourself deeper into debt.
One of the dangers of credit cards is many offer 0% interest rates only during an introductory period. After that, you can expect a high-interest rate and steep late fees.
However, this is one of the best options if you need a small loan but have bad credit as they’re easy to get.
Peer-to-peer Loans
These are relatively new on the financial scene, but you can now get loans from ordinary people through several websites. Since these do depend partly on your credit score, you do need to have decent credit to get one.
The way these work is that investors put money into these sites. Then, you borrow money from several people. As you pay them back, you get low interest and they gain from their investment.
If you qualify for one of these types of loans, it can be a great way to get what you need right away. Once you’re in a better financial position, you may even want to begin to invest in these lending clubs.
Best Way to Get a Loan with Bad Credit
The truth of the matter is that there’s no one way that’s going to be the best for every person. Since every financial situation is different, what may work for one person won’t work for another.
Take some time and look through the different loans on our list, then do further research on those that you believe will work best for you. Once you know what type of loan will be best for you, you can look at different lenders to get the best deal.
More Money Tips
Now you know that there are a variety of options available to get a loan even if you have bad credit. You also know that the best way to get a loan is different for everyone, so figure out what will work best for you!
If you want more money tips to help you spend less and save more, check out our money blog posts!
