At some point in their lives, every person will need a loan. Not everybody qualifies for standard loans though. If you have a good credit score, it will be easy to get a loan. If your credit score is fair or poor, you may have problems.
Those with bad credit will find it challenging to obtain a loan. There are loans for people with poor credit though. Those with a fair credit score and rating will find it tough, but they can get a loan. They will likely pay a much higher interest rate.
Even if you have never taken out a loan or a credit card, you could have less than perfect credit. Young people start out with lower scores because 15 percent of a credit score gets based on the length of your credit history. If you have no credit history, you will have a lower score until you take out a loan or credit card and make on-time payments.
Loans for Bad Credit Borrowers 101
Banks and other financial lenders speak their own language. You need to know a few phrases of it to make choosing your loan easier. Three terms describe how financiers refer to consumers. Depending on your credit score, you’re:
- Superprime – those with a credit score above 750
- Prime – those with a credit score 620 to 750
- Subprime – those with a credit score below 620
Your prime level determines a lot including your interest rate, fees and the type of loan for which you’ll qualify. If you are applying for a mortgage, your prime level will even affect the amount of money you’re required to put down on the house. Those in the prime or super-prime categories need only put 3.5 percent down, while those in the subprime category must put down at least 10 percent.
Learning About Your Credit
The first step in getting a loan is to study your own credit. This applies to every person whether you think you have great credit or poor credit. Start at a site like Creditry.com that can help you obtain your credit report and credit score. It also contains educational materials that help you better understand credit, how loans work and how to improve your credit.
Your credit score tells you if you need credit repair. Credit repair refers to a method of improving your credit rating quickly. This helps you raise your score so you will qualify for more than just the loans for people with poor credit. It includes contacting credit reporting agencies to inform them of mistakes on your report and having those mistakes removed. It also refers to debt consolidation and making balloon payments or other lump sum payments. Often, creditors make deals for lump payments, perhaps wiping the late payments off or bringing the account current. You may also use a tax refund to pay down debts. Using these methods can quickly improve your credit score.
Types of Loans for Bad Credit
Those with bad credit have a few options for loans. They can apply for:
- Secured loans
- Unsecured loans
- Payday loans
Secured loans refer to those that use collateral. If you own a home or a boat or car, etc., you could use it as collateral for a loan. With bad credit, you will still pay a higher interest rate, but it won’t likely be as many points higher than an unsecured loan or payday loan. The thing is that many people with really bad credit do not own homes or cars or boats. That leaves unsecured and payday loans as the loans for people with poor credit.
Somebody with bad credit can still obtain an unsecured loan. They will need a regular paycheck and minimal debts. While those with perfect credit ratings can obtain an interest rate like that of a secured loan, those with poor credit will pay much higher interest rates. You could pay anywhere from 5.99 percent to 35 percent interest. Think of unsecured loans as poor credit personal installment loans. You’ll still make payments on a monthly basis and you’ll get a standard loan period to pay it off.
Use payday loans as a last resort. Leave these cash loans bad credit option as the literal last option because they provide cash on only a very short term basis. These loans require a regular paycheck, too. Unlike secured and unsecured loans, though, these do not have an extended payback period of years. You must pay back a payday loan at your next pay date. If you get paid every two weeks, it will be due at the next paycheck. If you get paid monthly, you have that long. This type of loan has some of the highest interest rates.
All three types of loans carry the following requirements for the applicant:
- Must be eighteen years of age or older
- Be a legal resident
- Have an active and valid bank account
Finders and Loan Malls for Bad Credit Loans
You can make it easier on yourself to find a loan by using a lender finder services or our loan mall. A finder helps you find lenders who may be willing to loan to somebody with your credit score and prime level. Finders can help you find lenders for people with poor credit.
If you need to loan shop online, try a loan mall like Loanry.com to find a lender who may be able to help you find loans for people with poor credit. Loanry does not offer loans. It is not a lender. It is a website set up similar to a shopping mall. Instead of stores, it hosts various lenders. Just as you could walk into a mall and look at the directory to find a shop that sells pretzels or athletic shoes, you can navigate to Loanry to find lenders. Use it as a poor credit loan shop. The site lets you search by loan type. You complete a short, six item application. The site may help you find a third-party lender who may offer the type of loan you need. Once you find a lender, you may be able to complete a longer application with that lender.
The Challenge of Bad Credit
A low credit score does not have to mean you cannot get a loan. It can just be a challenge to overcome. Study your credit report and have mistakes corrected. Make lump sum payments where you can to increase your score. Quick credit repair probably won’t solve the whole problem, but it can help you get a better loan. Use a loan mall to find a lender who may help you find a loan for people with poor credit. You may pay a higher interest rate, but you may be able to still obtain the loan you need.
Carlie Lawson writes about business and finance, specializing in entertainment, cryptocurrency and FOREX coverage. She wrote weekly entertainment business and finance articles for JollyJo.tv, Keysian and Movitly for a combined seven years. A former newspaper journalist, she now owns Powell Lawson Creatives, a PR firm, and Powell Lawson Consulting, a business continuity and hazards planning consultancy. She earned BAs in Journalism and Film & Video Studies from the University of Oklahoma. She also earned her Master of Regional & City Planning at OU. Her passion lies in helping people make money while reducing risk.