Personal Loan Options for People with Bad Credit
It can be embarrassing to discuss your bad credit every time you approach a bank for a loan. To avoid the credit check, you can consider applying for a secured loan by providing collateral. But when you don’t have any security to provide, you can approach a small lender who offers both secured and unsecured personal loans for people with bad credit. Here are a few options in personal loans that you can choose from.
Signature loans are personal loans that are offered in return for your signature on a document or deed that binds you to pay back the borrowed amount. As this is called unsecured personal loans, a signature loan can be difficult to get if you have a low credit score.
But you have a chance of getting this loan when you apply for it jointly with a co-borrower or a cosigner who has the required credit score. The cosigner can be a member of your family, a friend, spouse or anybody significant in your life.
It is not always easy to find a cosigner who can help you in a financial crisis. In such a case, your four-wheeled friend can rescue you by serving as collateral to get a secured auto loan, provided you don’t have any more debts on it.
Excellent alternatives to personal loans, these secured personal loans can get you the required amount of money at a lesser rate of interest. But then, not all banks offer such personal loans for people with bad credit and some of them even insist on a good credit score.
Home Equity Loans
Another option of personal loans for people with bad credit is the home equity loan that is offered when your house is used as collateral. This kind of loan is less risky for the banks, but some banks still require a decent credit score. The disadvantage of this loan is that, you are using your most valuable asset- your home- as collateral and failure to repay the loan may result in your home being foreclosed.
Loans from Family and Friends
When the above options are not viable, you can approach a family member or a friend for a short-term or long-term loan, depending on your repayment capability. The advantage of this loan is that the family member or friend may not charge any interest and also offer you flexibility in terms of the time to pay it back. However, financial dealings between loved ones may damage your relationship with them, if not handled properly.
Short Term Loans
The best source of personal loans for people with bad credit are lenders who offer short-term unsecured or secured loans like payday loans, doorstep loans, and pawn broker loans. When you have a bad credit and are in desperate need of money to pay your bills, these small lenders can be of great help as they provide loans within a short time – anywhere between one hour and 24 hours.