August 24 2018
A low credit score doesn’t mean you can’t buy a home. In today's market, many lenders will approve mortgages for qualified borrowers with bad credit, while some lenders even specialize in mortgages for home buyers or refinancers with less-than-perfect or limited credit, and it won't matter if you have made poor financial decisions in the past and your credit score shows it, you may still qualify for a loan. That’s good news if you need to borrow money for any reason, whether a loan is needed to consolidate debt, pay overdue medical bills, or upgrade the car you need to get to work.
While that is good news, let’s now go onto the bad news. The problem with loans for people with bad credit is that, by and large, they tend to come with higher interest rates and fees. This means you’ll need to compare several loan options to find the best deal for your personal situation. This shouldn’t be a deal-breaker by any means, but you should plan to spend some time on your search.
Here are 2 ways to get a loan despite being in bad credit:
1. Look at the Options
Before you dive into our research, it’s important to remember that bad credit means different things to different lenders. In some cases, a lender won’t consider an application from a borrower with a credit score below a certain number, and so when it comes to getting a loan with really, really bad credit, your options are limited. The loans that do exist are often of the “payday” variety: low-dollar, short-term, and high-interest loans. While a payday loan can provide much-needed cash in an emergency, high interest and fees can make it difficult to repay the loan in the short time period typically provided.
Even before we go into details of this option, let’s understand what collateral means. Collateral is an asset a borrower owns, such as a house, car, or personal valuables, that is put up to reassure payment of a loan. If a borrower fails to pay their loan, the lender is allowed to repossess the collateral and sell it in order to make their money back. There are two types of loans available to borrowers — secured and unsecured.
Secured is named because each loan is secured by a borrower’s collateral. Usually the item put up for collateral is specified when the loan begins, whereas, Unsecured loans do not require any collateral. Borrowers are essentially promising lenders that they’ll be able to repay their loan in full. Lenders tend to see unsecured loans as riskier investments, so unsecured loans tend to come with higher interest rates.