Personal Loans for Poor Credit: What Are Your Options?
By Shane Dayton
Sometimes getting a bad credit score is unavoidable and when you do, it becomes very hard to qualify for a loan, but that doesn’t mean that you are out of options in terms of lending. There are other options you can turn to and still be able to get a personal loan. A bad credit score does not exclude you from acquiring a personal loan, but any personal loans for poor credit you do get will have much different terms than with someone who has exceptional credit. Furthermore, you might want to understand various options that you can use when it comes to personal loans because if you know your options you are much more likely to find the best personal loan for bad credit.
So just what are the different personal loan options for people with poor credit?
Home & Equity Line Of Credit
This is the first type of personal loan you can take advantage of if you are a homeowner. The obvious first requirement is to own a home. Even beyond that, however, is that you are required to have equity in it, as well. The equity requirement is important, otherwise, you will not be able to qualify for this type of a loan, regardless of credit area. However, even though you may qualify for this particular loan, you need to be aware of the fact that by obtaining this loan you will be using your home as collateral – so make sure you will be able to make those re-payments.
Often times this is considered to be the best personal loan for people with a poor credit score. That is because you can get a higher credit limit and there is no restriction as to how you can spend your money once it is entitled to you. Another benefit of this type of loan is that the interest rates even for bad credit tend to be much lower than that of credit cards.
Credit Union Personal Loans
Credit union loans are also open to those who have a poor credit score. However, for you to qualify for this loan you must be a member of a credit union. Once you become a member of the union, you are given the privilege of accessing a personal loan. Most credit unions offer financial services apart from loans. Furthermore, since they are not profit driven such as banks, their financial services are much more affordable.
Another reason as to why credit unions are often a good choice is because they work a lot less in investment and business and much more in providing personal loans for people with poor credit. That is a huge difference from most modern banks.
Another reason these loans are often popular is because many personal loans given by credit unions tend to be more forgiving on penalties when a payment is slightly late, which is a huge deal for a large number of people who live paycheck to paycheck and the first of the month doesn’t always fall on a Monday. Even better, there are no restrictions on how you can spend your money one it is awarded to you.
Peer-To-Peer Personal loans
When you’re looking for personal loans for poor credit, one solution that will come up quite often is the solution of peer-to-peer lending. Peer-to-peer personal loans are also known as P2P, and they are considered to be a reliable source of borrowing money for those who have bad credit. However, this can only be done online where most peer-to-peer lending sites are found.
Example of such sites that offer this type of personal loan includes Lending Club, Prosper, and Peerform as well. With the help of these sites, prospective borrowers can get loans from individual lenders instead of obtaining loans from banks and other lenders.
This type of loan is easy to obtain, and it only takes a few hours for your request to be approved. Furthermore, the interest rates are usually lower than credit cards and the potential fee to pay in terms of penalties is few. Moreover, you also get a chance to explain you case to investors as to why you have a bad credit score.
Co-Signed Loan Options
Co-signed loans are for those who have poor credit. However, for you to obtain this loan, a family member or friend with a good credit score must be willing to cosign a personal loan for you. If you have some to cosign for a loan, you can get credit with low-interest rates. Moreover, you also need to understand that your cosigner will be held accountable for the debt, and his or her credit score will be affected as well.
One of the advantages of co-signed loan is flexible terms and low-interest rates. Furthermore, there are not restrictions on how you can spend your money, what matters most is that pay back what you required on time.
An excellent personal loan for poor credit gives you an opportunity to build your credit score by allowing you to borrow more money. However, it is important that you improve your credit score by covering your debt on time to avoid unnecessary penalties. Personal loans for poor credit can be difficult to find with good terms, especially compared to other types of loans like poor credit business loans, but a little bit of research goes a long way to finding the type of lenders who are willing to work with you to give you the personal loan that you need to thrive.
Remember, you should also consider borrowing money from lenders who offer low-interest rates if you can find them, but your rates might be a little bit higher because of that credit score.
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