Low credit scores make it more difficult to get a traditional bank loan. Even so, if you’re in a hurry and in need of money, you’re not completely out of luck. Online lenders, specific banks and credit unions, payday lenders, and title lenders are all viable options to consider when trying to secure the funds you require. To make an informed choice, it’s critical to know how each one works in order to evaluate which one is best for your financial situation.
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Loans can be taken out via the internet.
Personal loans for people with bad credit are available from a number of online lenders. You could get a decision on a loan in just a few minutes after completing the application process. In some cases, same- or next-day funding is available if the borrower is approved.
It’s also possible to compare offers from multiple lenders using an online lending network. Since a soft credit pull is all that is required to see quotes, it is generally safe to do so. It’s possible to get pre-approved for a loan from some online lenders without damaging your credit score.
However, there is a drawback to using online lenders. If your credit score is low, you’ll likely be charged a high interest rate because you represent a greater risk to the lender. Depending on the type of loan, origination fees can range from 1 to 8 percent of the total loan amount.
People who prefer to get a loan without having to visit a local branch should use this option.
- The application process is streamlined, and a decision is made quickly.
- Next-day or same-day funding is available
- Borrowing costs are high.
- Initiation charges (if applicable)
Credit union or bank
A bad credit personal loan can also be obtained from a traditional bank. Because most lending decisions are based solely on your creditworthiness and income, they may not be the best option for you. It’s possible to be denied if your score falls below the minimum threshold.
Credit unions are a little more lenient than banks when it comes to credit card debt. They also look at your credit score and income to see if you’re a good candidate for a loan. Working with a credit union has its advantages in terms of developing personal connections. If you have a low credit score, credit unions may help you get approved even if you are a member.
Borrowers who are also account holders can take advantage of their existing relationship with the bank or credit union when applying for credit.
- Delays in obtaining approvals
- Low credit scores aren’t necessarily a deal breaker for established customers.
- Requirements that must be met with precision
- Higher APRs than online lenders.
Lenders of short-term funds
Payday lenders provide short-term loans of up to $500 in relatively small amounts. Even if you have a poor credit history, you can still be approved for one of these loans. However, there is a significant disadvantage. You’ll be saddled with a steep interest rate, sometimes as high as 400 percent, and a short repayment period to boot.
It’s common for borrowers to be unable to repay their loans by the due date, which is usually the next payday. Sadly, this leads to even more fees and a debt cycle that is nearly impossible to break out of. As a result, these loans should only be used as a last resort, despite their convenience.
Borrowers who’ve run out of other options should consider this.
- Not even a credit check is necessary.
- Instantaneous funding
- APRs that are too high and fees that are too expensive
- Repayment time is limited.
Lenders of liens on real property
Borrowers with less-than-perfect credit can also get loans from title lenders. Instalment loans based on the value of a car’s title are relatively easy to obtain. In most cases, you’ll pay a fixed amount each month for a period of up to six months. Payday loans have much higher interest rates than what you’d find on a long-term loan.
Although these loans use your vehicle as collateral, it is still a risky option. It’s possible that your car could be seized if you don’t make your payments on time.
People who can afford to pay back their loans on time will benefit the most from this option.
- A lower APR than that of payday loans
- Easy to get even if you have a bad credit score.
- Requires security before approval can be granted
- Seizures could happen to the collateral.
The gist of it
Consider the advantages and disadvantages of each choice before submitting an application for a bad credit loan. To make the best decision for your financial situation, get quotes from several lenders like GreenDayOnline and crunch the numbers. You may want to look into other options, such as a credit card or a loan. Borrow money from family or adjust your budget to meet short-term cash requirements.
FINANCIAL EXPERT at GreenDayOnline
Jason writes about all financial topics such as loans, debt solutions, and bankruptcy. He is an expert when it comes to subjects like APR, loan fine print, debt collection laws within the United States. With his in-depth knowledge of all things financial, he is a great asset to Greendayonline.