Having poor credit will often disqualify people from getting the loan they desire. However, there are other options besides traditional loans for those whose credit score is less than stellar. In this Rules of Thumb blog post from MoneyThumb, we will cover the 4 types of loans you can apply for even with a poor credit score.
A poor credit score does not matter when taking out emergency loans. Since the nature of these loans is to get money quickly, you can apply and get the cash in a short period of time. However, it is still important to review the policies of the lender and see if it matches your ability to pay back within a workable interest rate and time frame. It is also important to read through the fine print for any extra charges that may come as a part of the agreement.
Many people take out emergency loans to pay for unexpected medical expenses, schooling, or to cover daily needs until they get another source of income. Loans can range from $250-$1000 depending on your needs.
Another type of loan which may be useful for employed individuals is called payday loans. These are also short-term loans which are required payment on the following payday. Many payday loans do not require a high credit score, and it is often an option for those who need a quick cash turnaround.
Many payday loans can give you the cash amount within the same day. However, the tradeoff for these types of financing is the higher interest rates--it is important to compare lenders before taking out a payday loan.
Some important things to check on a payday loan before applying are:
Interest rates: Payday loans are known for their higher interest rates, which can go as high as 400% of the borrowed amount. Look for a competitive rate that is workable around your salary for the coming month.
The amount that can be borrowed: Another thing to consider with payday loans is the maximum cash you can take out quickly. If this is for emergency purposes, it is best to take out a loan that goes a little above the amount you have estimated that you need for a certain period of time. It can be challenging to take out multiple loans with varying policies from different lenders.
Time frame: Payday loans are typically paid within the day of your salary through post-dated checks. However, there are some gracious lenders that allow a little over that time frame. Find a lending policy that gives you a realistic time frame to pay.
Personal Loans for Bad Credit
There are personal loans that also exist for those with poor credit scores. They are typically used for debt consolidation or for other high-ticket purchases. Unlike payday or emergency loans, they have longer terms for payment and have lower interest rates than credit card loans.
These loans are also personalized for people with poor credit scores or those with little credit history. Although lenders may look into your credit score, it may not be a factor for consideration within their financing plans.
Lenders will have varied strengths such as fast turnaround, flexible plans, or utilizing secure options. When taking out a personal loan, think about your own needs and find the lender which best suits your priorities.
Hard Money Loans
Hard money loans are types of financing backed by real estate. If you are in serious need of finances at the moment and have some real estate property, you can take out hard money loans even with a poor credit score.
This type of loan is often short-term and the last resort option for those who are urgently needing cash. Typically, this loan is payable within 12 months, but some can be extended for about 5 years depending on your case.
With such loans, you don’t have to present your credit score to the lender. Rather, you would want to present the value of your real estate properties in order to get a good deal. This type of loan is often used to save another property from foreclosure, flip and sell property, and for other special considerations which can be paid quickly.