When it comes to personal loans, you can apply for two types of loans: secured loans and unsecured loans. However, if you are having trouble qualifying for a personal loan, consider other bad credit loans.
Secured and unsecured personal loans
Traditional personal loans can be secured or unsecured. Secured loans require that you provide something of value (also known as collateral), such as your car, savings account, or house, to back up (or secure) the loan. The lender can repossess the collateral in the event of late payment or default. This makes them less risky for a lender, which also means they tend to come with more favorable terms like lower interest rates and lower qualifying requirements.
Unsecured loans, on the other hand, are the more common of the two and do not require any collateral. Since these loans do not require collateral and therefore pose more risk to lenders, they usually come with higher qualification requirements and higher interest rates. The loans on this list are all unsecured personal loans.
Student loans for bad credit
If you are trying to cover your higher education expenses, then a bad credit student loan is probably the direction you want to go. Although private student loans generally require good credit, borrowers with bad credit can take out federal student loans, which do not require a credit check. Federal loans also come with the most flexible repayment terms, including forgiveness if you work in the public service or choose certain repayment plans.
Auto loans for bad credit
An auto loan is a secured loan that uses your car as collateral, which means the lender can repossess your car if you are late or default on your payment.
Just like with personal loans, the qualification requirements for auto loans vary for each lender and dealership. Although we recommend a minimum credit score of 670 for the most favorable terms, you can still qualify for a car loan with a lower score as long as you meet the Debt-to-Income Ratio (DTI) requirements and make a down payment. most important.
Payday Loans For Bad Credit
Payday loans are short-term, low-value loans (usually up to $ 500) that you repay once you receive your next paycheck, usually two to four weeks after taking out the loan. Many lenders do not require a credit check, which is often attractive to people with bad credit. However, don’t be fooled by your hopes. Payday loans come with a ton of risk and outrageous fees. Consider other alternatives first, such as personal loans or borrowing money from friends and family.
Home equity loans and HELOC for bad credit
If you have enough equity in your home (the current market value of your home minus your mortgage balance), you may be able to get a home equity loan or home equity line of credit (HELOC). Both allow you to pull on your home, which means your home secures the transaction and the lender can repossess it if you don’t pay it back. However, home equity loans are disbursed as lump sums, while HELOCs limit you to withdrawing funds as needed.
But borrowers with bad credit are unlikely to qualify for these loans. Most traditional lenders require minimum scores between 600 and 620. There may be a specialist lender or a credit union that will make an exception, but this is not common. People with scores below 600 should go through hard money lenders, such as private investors or businesses, not a bank. While hard money lenders are more flexible, they are generally a more expensive route.