The Best Loans for Bad Credit and How to Find Them
Best Loans for Bad Credit and How to Find Them
When you’re in a pinch a common solution is to take out a loan. However, if you have bad credit you might think that you can’t get a loan. While it is more challenging to get a loan with bad credit and even harder to get a good rate, you do have options.
How Bad Scores Affect Borrowing
Banks and other lenders do not want to loan out money if they think it is not likely to be repaid. To protect themselves from lending to people who might not pay their loans back, they make loans more difficult to access for people with low credit scores.
What Loans Can I Get With Bad Credit? 1. Credit Union Loans
Credit unions are nonprofit organizations that are owned by their members. Credit unions are like banks in that they can lend money and allow members to have savings funds, checking accounts, and other investments with them.
2. Home Equity Loan
If you need money now and own a home, you might also be able to take out a home equity line of credit or HELOC. Often called a second mortgage, you might be able to use your home as collateral to get access to cash.
3. Peer-to-Peer Lending
Peer-to-peer (P2P) lending is a relatively new form of borrowing. This option exists exclusively online and allows individuals to borrow from another individual, group of individuals, or an institution.
4. Payday Loans
While payday loans are designed for people with bad credit, it is best to avoid them. They provide a cash advance against your next paycheck, typically with interest rates exceeding 300%. This means that you give the lender access to your bank account to withdraw your next paycheck.
5. Credit Card Cash Advance
If your credit card allows it, you might be able to get a credit card cash advance. However, this option can be expensive. Unlike regular payments on your credit card, interest starts accruing on cash advances immediately and at a higher interest rate.
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