Having poor credit is no deterrent to obtaining a loan, though it will carry much higher interest rates than those available to those with good credit. Whether getting a loan with poor credit is a sensible option is debateable, as the high rates could lead to further problems. However they are extremely sought after as the mass rush to apply for federal housing association mortgage loans illustrates.
When the underwriting was tightened on these government backed mortgages changes meant that those with a credit score below 580 had to provide a down payment of 10% instead of the previous 3.5%. The subsequent slew of applications was the highest recorded. Those who require a personal loan with poor credit have a variety of options: here are 7 of them.
1. The easiest way to obtain a traditional unsecured loan bank loan with poor credit is to use a co-signer to stand as guarantor for the loan. The co-signer will of course need to have good credit. This method is also utilized by those with no established credit history, such as students who need a responsible co-signer with good credit to obtain private student loans.
2. Peer to peer lending sites offer loans to people with poor credit who can state a good case as to why they should be considered for a loan. They are a good choice as repayment terms and interest rates are mapped out, and are ideal for those whose credit is poor due to past actions who are trying to improve the situation.
3. Pay day loans are a popular way of getting loans with poor credit as no credit check is carried out on the applicant. The only criteria to meet are the age limit of 18, having a current bank account and a steady income of around $1000 per month. The loans carry fees which are represented as astronomical interest rates but are actually on a par with late payment charges on credit cards, when considered on a short term rather than annual APR. They are typically repaid when the next pay check is received and are designed to act as short term emergency loans. Often referred to as cash advances they can be obtained over the internet or directly from pay day lending stores.
4. In the same style as pay day loans but with longer repayment terms and higher amounts, bad credit loans now also proliferate online. High interest rates and fees apply to these bad credit loans which typically advertise amounts of up to $25,000 unsecured.
5. Property owners with poor credit are still able to obtain secured bad credit loans for home owners, providing they have equity in their property to be borrowed against. If the mortgae lender won’t grant a loan against the equity then once again there are bad credit home owner loans heavily advertised.
6. One of the simplest ways of obtaining a loan with bad credit is to utilize the services of a pawn shop. In exchange for collateral held by the lender, loans can be advanced on the spot.
7. Debt consolidation loans are available to those with poor credit in some circumstances. Typically agencies which advertise to reduce debts may offer debt consolidation loans. They are now harder to obtain through traditional means than they once were, but those with security to offer can still apply to traditional lenders as a first choice.
As demonstrated, it is perfectly viable to get a loan with poor credit, but expect to be charged high fees and interest rates. Improving ones credit score opens doors to less expensive ways of obtaining loans.