Loans For People With Poor Credit: What Are The Things You Should Know?

bad credit loans

Learn the best loans for people with poor credit as you read throughout this post! Upon reading this article, you will be guided about dealing with poor or bad credit along with options of loans that you can still avail regardless of your credit score status. Read on and find out more about bad credit and how it could affect you as an individual!

Introduction

Have you ever experienced having a lot of negative records, loan defaults or late payments on the credit report? If yes, then don’t be shocked that you have lower credit scores. And you know that this hurts a lot and will definitely lead you to a rough financial spot. But still, worry not! There are still loans for people with poor credit that could help you cope with your financial needs.

Apparently, you need to be extra careful when looking for such kinds of loans knowing that you have a poor credit record. Good to know that I am here to help you find the right financial aid. Here we go!

What is Bad Credit: An Overview

Bad credit refers to the credit history of an individual indicating that the borrower has high credit risk. A high credit score is an indicator of good credit while low credit score entails bad credit. For creditors, they would face a greater chance of missing payments or default if they will lend money to those with bad credit.

The credit history of an individual would be dependent on specific factors such as amount owed, timeliness of payments, and amount of the available credit. Once individuals don’t make timely payments or defaulted on a specific loan within a period, bad or poor credit is possible.

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And it would be a lot difficult to obtain loans if you have such kind of credit history. Fortunately, there are other options or loans for people with poor credit.

Causes of Bad or Poor Credit Score

We all know the importance of credit score! It will determine the fact whether lenders will grant loans or not. So, it would be crucial that you must learn the causes of having poor credit. Several elements could lead to bad credit score including the following:

Default Payments. Once you don’t pay credit card bills, there is an assurance of bad credit score. Besides, the unpaid accounts would be inevitably charged off after specific numbers of months.

Late Payments. The credit history is about 35% of the credit score. Make sure that your credit card payments should be on time in keeping the credit score from decreasing.

Charge-Off. The accounts would be charged off once the creditor sees that you don’t intend to make payments on the balances. It is definitely a harmful thing to your score if you are in charge off status.

Loan Defaults. Defaulting on the loan would affect the score like the charge off. It is a statement to any prospective finance company that you are a credit risk.

Collection Accounts. The creditors could sell or hire your delinquent debt to any third-party debt collectors in order to obtain payment for you. In most cases, it is a step that many would take before charging off the account. Most collection agencies could use questionable methods to make you pay such as threats of lawsuits, calling your employer and even your family members.

Foreclosure. This has the same effect on the credit as the loan default. It will send a message to the lenders saying that you are a high credit risk and will show a history of not being able to keep the payments on time. All late and missed payments are indeed shown on the credit report.

Filing Bankruptcy. This is considered as the most harmful factor to your credit score. And this is the option of last resort.

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Judgements. Creditors would look at the reviews since they would show creditors that the court system would force you to pay the debt. Indeed, an unpaid judgement is worse than the paid one.

These causes should be addressed immediately or must be prevented in order not to lead to bad or poor credit score. If you want help when it comes to your finances, making sure that you have a good credit history will matter a lot.

Side Effects of Bad Credit

Of course, there are consequences out of having poor credit or bad credit. In fact, you might be shocked how it could affect your life.

If you are ignoring your bills and maxing out your credit cards, credit history or score will be affected. You might wonder if what is the big deal with low credit score, am I right? Well, here are the side effects of having one:

  • High-interest rates on credit cards and loans.

Credit score would indicate as you would default on a credit card or loan obligation. If you have lower credit, it also means that you are a riskier borrower compared to someone with better or high credit score. Lenders and creditors would make you pay for the risk by charging a higher interest rate.

Once you are approved for loans, yet you have a poor credit score, you should expect to pay more in interest over time. And also, the more you borrow means, the more you would pay in interest.

  • Loan and credit applications might not be approved.

Creditors might be willing to accept only a certain amount of risk. Nevertheless, once the credit score is too low, you might not be provided with approval at all. Applications might be denied if you have bad credit.

  • Hard time for apartment approval.

In some cases, landlords would also check the credit before they approve a rental application. So, what if you have a weak credit? It might be hard on your part to rent a house or an apartment. If ever you can find a landlord who would let you rent regardless of your credit score, higher security deposit might be required.

  • Security deposits on some utilities.

There are utility companies such as cable, phone and electricity that will check the credit as a necessity during the application process. For those with bad credit history, you might need to pay a security deposit in order to establish service in your name, though you always pay your utility bills on time.

This security deposit will be charged upfront before establishing service under your name.

  • You might be denied employment as well.

There are specific jobs, particularly those that are in the finance industry or upper management might require a good credit history. You could be turned down for the job due to negative items on the credit report, unusually high debt amounts, outstanding bills, bankruptcy and more.

Be wary that employers will check the credit report and not the credit score. They aren’t checking the bad credit, rather the items that might affect the job performance.

  • You couldn’t get a cell phone contract.

Of course, cellphone companies will also check your credit. Since they will extend a month of service to you, there is a need for them to know how reliable your payments would be. Once the credit score is bad, you could get a prepaid cell phone or a month to month contract wherein phones are a bit more expensive or worse you can’t get one at all.

Once making or leasing payments on the cell phone, you might have to pay higher due to poor credit.

  • High insurance premiums might be experienced.

Credit is as well checked by insurance companies. They would argue that the lower credit scores are being connected to higher claims being filed. And this is the reason why they check the credit and eventually charge a higher premium to people with lower credit scores.

  • You might have a hard time starting up a business.

Bank loans are needed by many new businesses in order to fund their startup. If you have a bad credit history, it could limit the amount of money you will borrow in starting a business though you have a solid business plan as well as data that supports the success of the business.

  • Calls from the debt collectors.

Bad credit doesn’t lead to debt collection calls, but once you have bad credit, you also have some past due bills which debt collectors might be pursuing.

  • You can have difficulty in purchasing a car.

Banks will check the credit before giving the car loan. If you have bad credit, there is a possibility of being denied. Or if ever you will be approved, expect that you will have a high-interest rate leading to a higher monthly payment.

If you don’t want to experience the above-mentioned side effects, better work on fixing your poor credit and maintain good credit instead! There could be many ways on how to manage your credit properly.

Loans for People with Poor Credit

All the side effects will be experienced due to bad credit, so it could be hard to get a loan. Take note, it would be hard, but it isn’t impossible. There are options available as loans for people with poor credit, though it will take a bit of time and research as well in order to find the one that best suits your needs.

Some of these options are the following:

Visit a Credit Union

What are these credit unions? These are the same with commercial banks with regards to services. However, they are owned by the members instead of the profit-seeking shareholders. They are non-profit institutions, so they will pass the earnings along to the members in the form of lower fees and also borrowing costs, and there is an assurance of better customer service too.

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These institutions are willing to look beyond the poor credit history and make some judgement whether they will lend you money according to your character and your promising of repaying, even if you have bad or poor credit.

In fact, credit unions are looking for borrowers. So, if you could afford terms which match the credit history, you can also find a credit union that is willing to work with you. And if you want a personal loan, you must look for one wherein you have something in common.

Regardless of your credit score, you can have a more favourable loan if you will join a credit union.

Borrow from Friends or Family

This is a great idea to consider. But, not repaying a loan to a close associate or a relative could poison the relationship more than bad credit could ruin you.

Nonetheless, in most cases, those closest to you are the best sources of funds and also a family loan could benefit those that are involved. You must always treat any loan from your family or friends like a vital business transaction the same with a stranger.

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And this means you must formalize it with clear documentation and be legally recorded. For future problems to be avoided, creating a written contract which includes the loan terms, interest rate and the consequences as well.

Tap Home Equity

Once you have equity in your home, you could apply for a home equity line of credit or home equity loan. This refers to the difference between the amount the home could be sold for and also the mortgage.

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Home will serve as the collateral. Home equity loans could be obtained irrespective of your credit score. You will be provided with low-interest rate since the loan is secured by your home. Paying for the interest on home equity is also tax-deductible.

On the other hand, Home Equity Line of Credit acts like credit account. You have the chance to access money once you need to, up to the credit limit and you should pay it back depending on a predetermined schedule.

However, in both cases, it is crucial to take note that tapping the home equity will put the property in jeopardy once you don’t repay the amount borrowed. Indeed, for those with reliable income and if you are disciplined, this is considered as an inexpensive way of borrowing money from a reputable lender if you have poor credit.

And one of the benefits of HELOC is the extended loan term which will lower the payment even if you will pay more in the interest over a specified period of time. Don’t you like that?

Get a Co-Signer

There might come a point in time wherein it couldn’t be possible to borrow from a friend or family. What will you do if that happens? Well, approaching someone having a good credit who might trust your capacity to repay a loan is a wise step.

Just ask him to be your co-signer on your personal loan from the traditional lender. There is a higher chance that the lender will set the loan terms depending on the credit score of your co-signer who happened to have good credit. This co-signer will also be responsible for repayment, though.

The payment information will be recorded on you and the co-signer credit reports. In this case, you can damage the credit score of your co-signer once you default on the loan or you pay late. On the contrary, if there are timely payments done, your score will also improve resulting in an easier way of obtaining loans even without a co-signer in the near future.

Peer-to-Peer Lending

This option is also known as the person-to-person lending which is a new loan form circulating since the year 2005. It is referred as an online platform which allows the borrower to directly borrow from another individual instead of borrowing from an institution.

Those possible borrowers could post a loan listing on several peer-to-peer websites which indicate the amount wanted and the purpose too. Investors will review this listing and will choose the ones that they would want to fund.

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Yet, your credit score still becomes a factor. However, since an individual investor has greater leeway with regards to how to weigh the loans are a lot more readily available for those with poor credit. The standards of lending are a lot more lenient as well as the interest rates are lower compared to those that are offered by traditional ones.

Also, this peer-to-peer site helps a lot in evaluating risk for the lender at the same time verifying the credentials of the lenders for the borrowers.

Secured Loans

In a case wherein your bad credit doesn’t impress the credit unions or banks, a secured loan could be the best chance in order to get money that you need. This is about borrowing against the asset you own like boat, car, savings, home or even stocks.

Your asset will be held by the lender as the collateral against you if ever you default the loan. Secured loans offer better terms and access to larger amounts of money and lower interest rates than the unsecured loans. And another good thing is that they also improve the credit score once payments are made on time.

The amount of money that you can get will be determined by the amount of equity that you have in the asset that you use as the collateral. So, your home is regarded to be the best piece of collateral for you to be approved with a secured loan.

But, make sure that you don’t default the loan if you don’t want to lose your home.

Most banks would make secured loans according to the amount that you have in your savings account or on the value of your stocks. There is a need for you to liquidate the asset once you have paid off your loan which means you are still the owner of the stocks or savings.

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On the other hand, once you plan to use the stocks or savings as the collateral, you must liquidate them and utilize the money in paying other debt that you want to settle than taking out the loan.

Online Personal Loans

Personal loan lenders become popular because of the technology and a wide gap in the marketplace wherein a new industry open another option of loans for people with poor credit.

These kinds of lenders work online and render competitive loans for things such as home repairs and credit card debt consolidation. And the primary appeal of this option is that they work fast. They could even make decisions just within a few minutes and could deposit the funds in your account few days or even hours only. Most of them would not require application fee or any pre-payment penalty fee.

These days, online personal loans are easy and simple to fill out. In fact, credit scores are only a piece when it comes to decision-making, so this is indeed a great option if you have poor or bad credit. Some lenders would also have their credit-score model.

And other factors are taken account into including your college degree, school and employment history.

Title Loans

These loans will allow you to borrow up to the value of the car in exchange for turning the ownership title over to your loan company. Usually, owning a car immediately would require you to be eligible for this kind of loan and also the loan terms are 30 days or more.

Payday Loans

These loans will let you write a check for the amount that you want to borrow along with a set fee. The lender would hold the check up until the next payday once the loan comes due. And these loans could end up costing you more than the traditional loan.

Interests are high, and if you couldn’t repay them on the scheduled due date, there would be additional extra fees.

Retirement Account Loan

I put this on the last of this list because this should definitely be the last option you should consider since the high tax and the early withdrawal penalties related. Nevertheless, once you have exhausted all the other options I have discussed above then this loan could help.

You need to make sure of taking the loan vs the straight distribution to mitigate the penalties and taxes. However, one great thing about this is that you will be paying back the interest to yourself.

The loans mentioned above are among the loans for people with poor credit! So, don’t worry if you have a bad credit since it isn’t impossible to get loans. You only need to choose from these options and be wary of the consequences too!

How to Pick the Best Bad Credit Loans?

If you are looking for a loan with bad credits, interest rates are a significant consideration. However, there are other factors that you should consider. Some of these factors are the following:

Reasonable APRs. Of course, it could be hard to find a loan with low-interest rate with a bad credit score. There are exorbitant APRs mainly if you have a very low credit score and you are trying to get a loan with no collateral. Lenders will keep the interest rates competitive associated to your credit score.

Higher Loan Limits. It is common for most lenders to cap loans for people with bad credit at low amounts, but most lenders will allow larger loans for those who definitely need them.

Reasonable Fees. Some of the typical fees would include charges for late payments, loan originations, pre-payments and to unsuccessful payments. Some would charge all these while others don’t. You should find the best lender that would keep the fees to a minimum and will charge a reasonable amount for those that they do require.

Easy-to-Find Specifics. You can say that you can find the best lenders if they will understand that possible borrowers would want to know the potential APRs, fees, loan terms and amounts before beginning the application and also include the information on the easy-to-find pages on the websites.

Flexible Terms. To save on interest, you might want to pay off a loan as fast as possible, or you can pay it for a longer term to keep the payments a bit low. Best lenders wouldn’t lock you into a predetermined term or two, like three or five years.

Reputation. Of course, you must be able to determine if the lenders are reputable enough before you borrow money and provide your information. Reviews of other borrowers could help a lot.

These are things you need to keep in mind in order to pick only the best loans from best lenders though you have bad credit.

Best Poor Credit Loans This 2018

If you think that you couldn’t get a loan because of a bad credit, you are definitely wrong! There are loans for people with poor credit only that you need to take time in finding the right option for you. Aside from finding the right lender who will not focus on your credit score, lenders should also be transparent enough about fees, rates and flexible terms.

With that, check out some of the best poor credit loans to choose from this 2018 below:


Bad Credit Loans


Do you have a terrible credit score? If yes, options for loans might be limited. A payday loan is an excellent choice, though. This loan could offer much-needed cash in an emergency, fees and high interest could be a problem when repaying the loan.

BadCreditLoans.com isn’t a lender, but it is a tool that will connect you to a network of willing lenders. If you will apply online, it is required that you should be 18 years and above with valid email address and phone number. You should also provide the proof of legal residency or citizenship along with a checking account in your name and a regular income.

Right after putting in your request, there is a need for you to wait to receive offers from the network of lenders. But, based on your financial situation, you might not receive any offers at all. Or if ever you do, specific rules are applied.

The most important thing to bear in mind before you accept the unsavory loan offer, there should be no other options, and you could pay back the entire loan once it is due.

PROS

CONS

  • Even if you have a truly bad credit, you can still qualify for a loan and those with good credit could borrow higher amounts.
  • It is free to apply or there is no obligation to accept some offers and there is no inquiry about the credit report.
  • They will solicit offer on your behalf from the network of lenders for you to choose the best loan terms.
  • Most of the applicants could be pre-approved just within five minutes and receive the funds through direct deposit like within a day.
  • Free to put in request but no assurance of getting an offer from one of the lenders.
  • High interest rates
  • Limit amount to approve for very poor credit
  • Beware of loan renewal and being trapped in the cycle of debt

Peerform


For those who don’t have a good credit score, yet not that truly bad, this one is another great option to consider. Peerform is known to be a peer-to-peer lender considered by many. If you have a credit score below 600, you will be declined. So, better raise your credit score a bit to get a loan from this lender.

Due to the credit score restrictions, they could offer loans that would range from $4000 to $25,000 to possible borrowers having APRs from 5.99% to 29.99%.

On the contrary, it might take up to two weeks to receive the fund. This might not be great if you need the money immediately. There are also fees that are associated with their loans including origination fee.

PROS

CONS

  • High borrowing amount limit
  • Low advertised APRs
  • Very clear about loan amounts, fees and APRs
  • Needs better credit score
  • Doesn’t offer secured loans
  • Several fees applied
  • Loans not given quickly

One Main


This lender specializes in personal loans, along with an offering of secured and unsecured loans. In general, once the credit falls within the bad or poor range, you would need to decrease the loan amount, or you can look for a secured loan. If you get a secured loan, it means you put something up for the collateral like boat, motorcycle, car, truck and more.

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If ever you are approved for your loan, it would range from $1500 to $10000 with APR in between of 17.59% and 35.99%. The length of term would vary between 24, 36, 38 and 60 months. And you can also visit their branches in person aside from doing everything online.

PROS

CONS

  • Offers secured and unsecured loans.
  • Branches are available
  • Reputable lenders with years of experience
  • Vague about possible APRs as well as loan amounts
  • Branches are only within 44 states

And there are other options out there that you can choose from. Just make sure to look for a reputable and best lender that will address your financial needs.

Tips to Borrow Responsibly

You can indeed minimize the idea of being a victim of a debt trap by becoming a good borrower. This is actually what you should do, indeed! Here are some of the ways on how to borrow money responsibly:

  • Borrow money only when you really in need of it.

It is advisable that you must only consider borrowing money, especially if you already have bad credit, in times of emergency and not due to buying something that isn’t important at all. Loans for people with poor credit could charge a very high-interest rate along with other fees.

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In most cases, it is a lot better to wait for the next paycheck. However, if the situation is really urgent, these loans might be useful.

  • If you really need to borrow, only borrow enough money.

Though you are rest assured of getting approved for online loans, you need to borrow only the amount you need. Getting more compared to what you actually need would mean being charged with a high interest on the surplus amount. And again, these loans will work best once the situation is urgent and not during times that you want to buy something not essential.

  • Look for the best lender.

Before you apply for an online loan, you should consider the best terms. Those loan sites that would feature powerful search engine tools can make it a lot faster and easier to find the best lender.

You simply need to enter the needed information and also the loan that you need. These sites would give you the right lenders and what you need to do is to compare the penalty fees, payment terms, interest, and other hidden fees.

  • Always pay on time.

Of course, you should! There are times wherein borrowers are faced with a decision between paying the loan first or buying something that is on a limited deal. In some cases, borrowers will roll over the loan just to use the money for other non-urgent purchases. This is a big NO!

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You should pay on time to protect the credit score and also to avoid any risk of blowing up the small loan.

  • Don’t run away and talk to a direct lender.

In general, lenders are willing to talk about providing the borrowers with some leeway once paying loans. Talk to the lenders and work out a technique on how you can pay back. Lenders want you to pay to get their money back, so they will indeed help you to pay back.

You only need to make sure of not letting them intimidate or harass you or even force you to borrow a loan again. Why? Because these are illegal practices that you could report to the authority.

Falling into a debt trap might be avoided if you will become a good and responsible borrower. And of course, you will have a better credit score too!

How to Spot Bad Credit Loan Scams?

It is possible that you might be too desperate about getting a loan making you vulnerable to grab any loans available. But, you should know that there are bad credit loan scams out there.

To help you avoid availing these scams, here are some key factors to be aware of:

Upfront Fees. Always remember that it is against the law to charge you because of filling out an application.

Guarantees. You are guaranteed of legitimate lenders if they want to know your credit score, income and other personal information. If the lenders guarantee you a loan even without evaluating your information is probably as scam.

Fishy-sounding Names. There are some unscrupulous companies that will closely copy the names of the legitimate lenders just to profit from their better reputations. So, you need to make sure that you are really doing business with a reputable company.

Lots of Uninitiated Contact. You should be careful once you are getting constant calls or mailings from the company. If lenders are legitimate, you don’t need to hound possible customers.

Scare Tactics. It is common that you shop around for the best deal and exert time and effort to evaluate how much you can borrow safely. The lender must not pressure the borrower to make a deal prior to considering the options.

Pushy Requests for Personal Information. You must only provide personal information to the company that you trust if you know the kind of loan that you are applying for. Be wary about providing information over the phone, particularly if you didn’t call them in the first place.

Final Thoughts

There you have it! Indeed, knowing the importance of credit score, you should learn some of the best loans for people with poor credit. I have provided the needed information above and it is your goal to find out the right lender for your financial needs. But then again, the best thing to do is to borrow responsibly and work on improving the credit score eventually!

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