back to articles | December 13, 2022 | Pat Lee
Categories:   Auto Loans & Financing    Types of Car Loans
5 Loan Options for People With Bad Credit
Getting a loan with bad credit or no credit history may be difficult, but it’s possible. There are a few lenders out there who work with borrowers with poor credit scores, allowing you to borrow money for emergency expenses such as medical bills, home renovations, or car repairs.
Getting a loan with bad credit or no credit history may be difficult, but it’s possible. There are a few lenders out there who work with borrowers with poor credit scores, allowing you to borrow money for emergency expenses such as medical bills, home renovations, or car repairs. However, lenders might charge higher interest rates or add origination fees, early repayment penalties, and late fees to borrowers. Here are a few loan options if your credit score lands between 300 and 579.
1. Payday loans
Payday loan providers usually don’t assess your credit score when deciding whether you are eligible for a loan. There is no set definition of a payday loan, but it’s often a short-term, high-cost loan, often $500 or less, generally due to your next payday. Payday loans don’t require any collateral, making them unsecured loans. These loans are available online or through storefront lenders.
Some states do not permit payday loans, while others limit loan sizes and fees. In states that don’t allow or regulate payday lending, you can get more information from your attorney general or regulator.
2. Peer-to-peer loans
Peer-to-peer loans, or P2P lending, is an online platform that allows borrowers to get bad credit loans directly from another individual or group of people instead of a financial institution. A willing borrower posts a loan listing on different peer-to-peer platforms, specifying the amount of money required and what it is for. Lenders will review the requested loans and pick borrowers they wish to finance.
3. Auto title loans
A car title loan is a fast and easy way to get extra cash if you have a bad credit history. Depending on your car’s value and the money you need, a car title loan lender will work with you to determine how much you can get, usually up to $10,000.
Car title loans are short-term loans in which you pledge your car as collateral. You don’t need any credit assessment to be approved for a car loan since the lender can repossess your vehicle to cover the losses if you fail to pay off the loan.
4. Payday alternative loans
Payday alternative loans, commonly known as PALs, allow some federal lending institutions’ members to borrow little cash at a reduced cost compared to conventional payday loans and pay off the loan over an extended period. These aspects can help loan borrowers avoid the possible debt cycle created by high-cost, for-profit brokers.
Most pay alternative loan lenders don’t require borrowers to have good credit. They are more interested in your income and ability to repay the loan. You may be needed to give proof of income when you submit your application.
5. Personal loans
Personal loans are installment loans offered by online lenders, banks, and credit unions. These loans can be secured or unsecured. Although these loans often have higher interest rates than personal loans for individuals with healthy credit scores, they can be cheaper than auto title loans or payday loans.
There are some loan options if your credit history falls within the bad credit range and you need to borrow cash for an emergency. Keenly look at the terms of each type of loan and be ready to pay it back. Some loans could even help you build or rebuild a healthy credit history.