It can be a complicated matter to have a bad credit rating and get black-marked as a credit risk, especially if you’re looking to take out a loan or mortgage in the future. Poor credit means you are a high risk for lenders & institutions who will moderate this risk by charging high-interest rates or rejecting your loan application altogether.
Usually, having poor credit will make it hard to get approved for any kind of loan. Luckily, there are options even for those with poor credit. What’s even beneficial is that those options will only carry out a soft credit inquiry when individuals apply to find out what rates they can offer. This means your credit score won’t be affected, so you don’t have to worry about harming it further.
To make it easier on your part, we did the research and found a number of sources that lend to people who may have bad credit. Check out the list below to explore your options.
- Payday Loan Alternatives
The process to get a payday loan with bad credit isn’t difficult. Usually, there are minimum qualifications, which include proving that you have a valid bank account, a steady source of income and are 18 years of age or above. However, payday loans are short-term and full repayment is often due on the applicant’s next payday – which can drain your cash flow required for regular expenses, like gas, groceries or bills.
Fortunately, alternative payday loans for bad credit exist. Installment loans, for instance, have similar eligibility criteria with more flexible terms. The application process is quick and easy and the funding can be received as soon as the next business day. The best thing about such payday alternatives is that they have flexible terms that can be repaid in installments or paid back earlier without charge. As such, the lenient repayment terms are less likely to put you in financial distress.
- Secured Personal Loans
Secured personal loans are backed by assets, like a car in case of a vehicle loan or a property in case of a mortgage. The asset is kept as collateral for the loan. If you agree to the loan, you bind yourself into an agreement that the lender will repossess the collateral if you don’t repay the loan according to the pre-agreed terms and conditions. The lender repossesses the asset, sells it and then use the proceeds to pay off the loan.
So if your situation allows you to put up a few assets as collateral, this might be a viable option to consider. In addition, secured loans enable borrowers to get approved for higher limits. However, we recommend choosing a loan that you can easily afford. In case of secured loans, some of the things you should pay attention to are the repayment period, the interest rate, and the monthly payment amount.
- Guarantor Loans
A guarantor is a person who trusts you to proceed with your loan repayments on time and is also content to make any in case you do not. In this scenario, applicants will use a family member or friend, as they tend to know them best, but a guarantor could be any person. Just to give you an idea, employers, work colleagues and neighbors could be loan guarantors, as well.
However, a guarantor doesn’t necessarily mean your application will be approved without additional verifications. The lender will see your credit rating to check if you can realistically pay the loan back by due date. If you repay guarantor loans promptly and timely, you should see your creditworthiness rise significantly.
So if you were turned down by conventional lenders in the past and think no one can assist you with the loan you need, the above-mentioned options might be able to help.