4 types of loans you can apply for if you don’t have great credit
Having a bad credit rating can often seem like a disqualifying trait for many financing options. It often feels like banks and other reputable lenders will turn you down because of your credit score – and while some may, all hope is not lost.
The typical advice is to increase your credit score until you achieve a good reputation, then take out a loan. However, what if you need money immediately for an urgent need? If your credit score is not very good but you need the means to get some money through a loan, there are still ways to do it. In this article, you will learn about the types of loans that you can apply for even with a bad credit rating.
Hard money loans
Hard money loans are types of financing backed by real estate. If you are currently in serious need of financing and own real estate, you can take out hard money loans even with a bad credit rating.
This type of loan is often short term and is the last resort for those in urgent need of cash. Typically, this loan is repayable within 12 months, but some can be extended for about 5 years depending on your case.
With such loans, you don’t have to present your credit score to the lender. Rather, you would like to present the value of your real estate in order to get a good deal. This type of loan is often used to save another property from foreclosure, flip and sell a property, and for other special considerations that can be paid off quickly.
A bad credit score does not matter when taking out emergency loans. Since the nature of these loans is to get the money quickly, you can apply and get the money in no time. However, it is still important to review the lender’s policies and see if they match your ability to repay within a workable time frame and interest rate. It is also important to read the fine print for any additional charges that may come as part of the deal.
A lot of people go out emergency loans to pay for unforeseen medical expenses, education or to cover daily needs until they get another source of income. The loans can range from $ 250 to $ 1,000 depending on your needs.
Another type of loan that can be useful for salaried people is called payday loan. These are also short term loans which must be paid on the next payday. Many payday loans do not require a high credit score, and this is often an option for those who need a quick cash flow recovery.
Many payday loans can give you the cash amount in the same day. However, the tradeoff for these types of financing is the higher interest rates – it is important to compare lenders before taking out a payday loan.
Some important things to check on a payday loan before applying are:
Interest Rate: Payday loans are known for their higher interest rates, which can go up to 400% of the amount borrowed. Look for a competitive rate that is achievable around your salary for the coming month.
Amount That Can Be Borrowed: Another thing to consider with payday loans is the maximum amount of money you can withdraw quickly. If it is an emergency, it is best to take out a loan that is slightly more than the amount you have estimated you will need for a certain period of time. It can be difficult to take out multiple loans with different policies from different lenders.
Deadline: Payday loans are generally paid within the day of your payday by means of post-dated checks. However, there are gracious lenders who allow a bit more of this time frame. Find a loan policy that gives you a realistic payment term.
Personal loans for bad credit
There are also personal loans for those with bad credit. They are generally used for debt consolidation or for other expensive purchases. Unlike payday or emergency loans, they have longer payment terms and lower interest rates than credit card loans.
These loans are also customized for people with bad credit or those with little credit history. While lenders can review your credit score, this may not be a factor in their financing plans.
Lenders will have various strengths such as quick turnaround times, flexible plans or the use of secure options. When taking a Personal loan, think about your own needs, and find the lender that best fits your priorities.
Bad credit score? Getting a loan is always possible
Thanks to the various options mentioned above, a bad credit score is not a dead end. It is always possible to take out a loan. By knowing your choices and priorities, you can still qualify for a loan while successfully paying the lender on the agreed terms.
This article does not necessarily reflect the views of the editors or management of EconoTimes.