Sometimes people with bad credit think that getting a mortgage or loan is out of their reach. However, there are still some loan options left for people with bad credit. Here are some loan options if you have a bad credit score.
- Home equity loans – If you own a home with equity in it, you can consider getting some home equity credit. Even though it is a good loan option, but it does not come without risk. The main risk of home equity loans is you are putting the house as collateral. If you are considering this loan, you can secure for the tax-deductible line for the credit at a reasonable interest rate and no restriction.
- Bad-credit loans – The bad-credit loan is a specific loan for people with bad credit score. This type of loan is very easy to get, but it is also easy to get trap in the endless cycle of debt. This is because most bad-credit loans have ridiculously high interest.
- Credit union loans – Getting a loan for people with bad credit is much easier to get in the union loans than from banks. In union loans, almost anyone with any credit score is eligible to join the membership. Since union loans are a not-for-profit organization, they offer loans and several financial services cheaper and easier than regular banks. Plus, the numbers of customers of union loans are also much higher than banks.
- Co-signed loans – Getting co-signed for a loan when you have bad credit score may not be easy. However, it is one of the good choices that you have to get a loan. For this point, you need to convince some whom you trust, whether it is a family member or a friend. In case you fail to pay the loan, your co-sign partner will have to pay the debt and it surely affects both parties’ credit score.
When you have bad credit, it means that you will have to pay more for the loan. The theory is simple but it is not something that will last forever. This means that you always have the chance to build up the score before getting a loan. It may sound and takes time, but there is always a way to make up the credit score.
- Peer-to-peer loans – Peer-to-peer loan is a relatively new method to get a loan. This type of loan allows borrowers with bad credit score to borrow money from individual lenders through websites. Even though it is relatively easy, but the peer-to-peer loan is still considered unsecured.
- Secured loans – Similar to home equity loans, the secure loan allows you to get a loan and put something as collateral. In simple, the loan is secured by valuable assets such as home, cars, and so on. Getting this type of loan is relatively easy to get for someone with a bad credit score.
- Loan from family or friend – Getting a personal loan from someone close to you should be the last option. This loan does not consider your credit score, but it may put the personal relationship at risk especially if you fail to pay back the loan. Sometimes, people get too ashamed to ask for their close persons for a loan. However, before agreeing on this type of loan, it is important to have written proof for of the loan such as the interest charged, amount of loan, number of payment, and duration of the loan. Doing this will help prevent the damaged relationship, hurt feeling, and even legal action. Make sure to only borrow money from the loved one when you can pay back the loan on time and in full.
Credit score may be one out of many factors that loan lenders consider before giving loans out. Loan lenders may also look deep in your credit history before deciding whether you are eligible to receive a loan or not. The credit history checking is not a pleasant process but loan lenders need to know the risk for lending money to the borrower.
The thing is not all people have a good credit score. Some of them have bad credit and they find it difficult to get a loan. It is an undeniable truth that loan lenders tend to judge people from the credit score. However, people with bad credit score still have the chance to get a loan. Find out the step below.
Understand anything related to your credit score
Before applying for any loan, it is important to know your credit score because the lenders know it as well. That three-digit credit score plays a huge role whether you are eligible to receive the loan or not. There are several ways to find out your credit score such as ask your bank or go online.
After knowing the credit score, you need to understand what the score means. Well, loan credit score consists of three digit numbers. The credit score determines the interest rate for every loan. For example, people with a credit score of more than 720 usually pay 11 percent interest rate. People with subprime usually pay 29 percent interest rate. However, conventional lenders will not offer any loan at all for people with a score of less than 550.