A bad credit rating may follow you around like a bad penny. The good news is that with the evolving financial world, there are bad credit loans that are available for individuals who do not qualify to borrow from the bank.
However, to get the best loans, it is important to find a lender who is transparent about rates and fees. Your lender of choice should also view you like more than your credit score. Although these loans typically have higher interest, borrowers should still be knowledgeable about their options.
Here are four types of bad credit loans that you should know:
1. Personal loans
These are the most common type of bad credit loan. Usually, it involves borrowing up to $25,000 for a period of one to seven years. However, the interest rate for personal loans is normally fixed. As such, the borrower will know exactly when the loan should be repaid. These loans are often issued out as a result of a quick credit check, sometimes with no guarantor needed. Lenders tend to look for people with a bad credit rating but have decent odds of being able to pay back the loan in full.
2. Guarantor loans
While there are some bad credit loans with no guarantors, these types of loan can only work with a third party agreement. To qualify, a guarantor, usually a family member or friend should be willing to guarantee that if the loan is not paid back, they will be responsible for it. Many people with a bad credit history often resort to guarantor loans. Often, the ability to get a guarantor depends on the type of lender, how bad the credit score is and whether or not the borrower’s finances are well-documented.
3. Homeowner loans
Just as the loan name suggests, homeowner loans are only issued when the borrower puts up their home as a guarantee of payment. As such, there is no guarantor needed. This makes it possible to borrow a larger sum of money. It is important to know that the lender can repossess the home if the loan is not paid back. These loan types normally have varying interest rates and a longer repayment period (up to 25 years). However, this means that the borrower will be paying more interest during the lifetime of the loan.
4. Auto title or log book loans
With these types of bad credit loans, borrowers secure the loan against their car. The amount of interest is extremely high. Despite this, logbook loans can be a perfect solution for those who are looking for a financial boost as they fix their credit rating. Although there is no guarantor needed, borrowers should be certain that they can pay the loan in full to avoid the repossession of their car.
Remember all lenders are interested in your ability to repay a loan. It is important for bad credit borrowers to understand their options to make the best borrowing decisions. It is also important to work with a credible lender to avoid any financial issues that may complicate the borrowing process.