Pretty much everyone is going to run into financial difficulty at some point or another. Some people will rise about the problem and find a solution. Others will allow their problem to escalate and they’ll spiral out of control. If you fall into the latter category, there is a good chance that you’ll experience bankruptcy or your credit will be negatively impacted. Bad credit can haunt you for the rest of your life. Thankfully, there is assistance out there for consumers that have poor credit. Below, you will find a breakdown of some of the best types of loans for consumers with poor credit.
Bad Credit Loan
As the name suggests, a bad credit loan is a type of loan that is specifically designed for people with poor credit. In fact, even people with the worst credit imaginable can qualify for loans for bad credit. However, this doesn’t mean that you should sign on the dotted line right away. These loans will normally come with major cons that can make them incredibly risky. For starters, they normally have significantly high interest rates. Secondly, there is usually a limit as to the amount that you can borrow. Make sure that you’re aware of the risks before signing up. Otherwise, you may regret it in the future.
Credit Union Loan
There is a pretty good chance that there is a credit union or two in your area. Credit unions are similar to banks, but they’re also slightly different. For starters, credit unions offer loans without so many restrictions and requirements. Depending on how bad your credit is, there is a possibility that you will be able to get a credit union loan, whereas you might not be able to get a loan from a big bank. The lending standards are relaxed and credit unions offer loans with fewer fees and penalties. Finally, credit unions often provide unsecured loans to people with poor credit.
Unfortunately, there are some limitations on the amount you’ll be able to borrow. Also, unsecured loans will usually have a much shorter loan period.
Home Equity Line Of Credit
For consumers who are ready to buy a home, a home equity line of credit will be the best loan option. This type of loan is designed to help individual with a low credit score obtain a loan with a reasonable interest rate. However, the HELOC does not come without risk, since you are required to put your home up as collateral. So, before applying, be sure to perform an extensive search inquiry on the HELOC.
In order to qualify for a HELOC, you must have a “loan-to-value ratio of approximately 80 percent.” This means that you need at least a 20 percent equity stake in your home, before the financial institution will even consider you a good candidate for a HELOC. A low debt-to-income ratio and strong employment history are also required.
As pointed out by the Better Credit Blog, peer-to-peer loans have grown increasingly popular during the past few years. This is a unique type of loan that allows the borrower to avoid the credit union and the bank all together. Instead of borrowing from an institution, you’ll actually borrow money from another consumer. There are tons of websites that will grant you access to others that are willing to lend you money. P2P loans are far easier to acquire than loans from traditional banks. Also, the interest rates will usually be somewhat lower and you’ll pay fewer fees.
Unfortunately, it may take a little while to receive the loan. Depending on the lender in question, you may have to wait a week or two before you actually receive the money that you need.
Finally, you should consider teaming up with a friend or family member. If you know someone who has good credit, you can use them as a cosigner. This will allow you to take advantage of their good credit to get the money that you need when you need it the most. Just remember that this individual has put their neck on the line for you! Make sure you repay the loan and do not hurt their credit. Do not risk putting your relationship in a bad situation, unless you realistically believe you can pay off the loan in time.