Loans For People With Credit Problems: Options You Need To Explore

lender working with clients arranging loans for people with credit problems

9 Helpful Loans For People With Credit Problems

Are you the type of person in search of financing options that provide loans for people with credit problems? In 2015, on average one in three people were either denied credit or offered less than they requested.

The majority of people do get accepted for the loans they apply for. But if your credit score isn’t great you may struggle to get approved for more traditional loans.

lender pointing to loan option information

Improving your credit score takes time and money. If you need a loan now, then you obviously don’t have either. But there are other options available to you.

So read on as we explore some of the options for loans for people with credit problems.

1. Home Equity Line of Credit Loans

A home equity line of credit loans is a good option for people who own their own homes.

A home equity line of credit, or HELOC, uses the equity in your home as collateral. Instead of receiving a lump sum, you use the line of credit to borrow smaller amounts up over a period of time, up the maximum of your credit limit. It is similar to how a credit card works.

The term of the line of credit can be anything up to 25 years in length, and the amount drawn paid back with interest. This due back at the end of the term.

Since a home equity loan with bad credit could put your home at risk, this is really best used for major items.

2. Payday Loans

If you need money in the very short term, then payday loans are an option.

Payday loans are exactly as they sound. They are short-term loans that are only meant to tide you over until you receive your paycheck, at which point the loan must be repaid.

man with cash in hand on payday

Payday loans have traditionally had eye-watering interest rates of up to 1000% which many people have been unable to manage. For this reason, they are only legal in 27 states. Regulation has also limited the interest rates to around 30-40%.

If you can afford the interest, need a very short-term loan, and they are legal in your state, a payday loan could work for you.

3. Bad Credit Loans

Lenders provide bad credit loans specifically for people with a bad credit history.

Since people with bad credit are a much higher risk for the loan company, they cover this risk by having a much higher interest rate and limiting the amount that people can borrow.

But if you don’t require a huge amount and can make your repayments, then people with bad credit can usually obtain approval for this type of loan.

4. Credit Union Loans

Since credit unions are not-for-profit organizations, they can offer loans for people with credit problems more cheaply than standard banks.

It also means that their standards for granting credit are lower than the banks, so people with poor credit have a better chance of being accepted. Credit unions are also more likely to offer unsecured personal loans for people with bad credit.

However, the loan period for unsecured personal loans is likely to be shorter, and there may be a limit to how much you are able to borrow.

5. Debt Consolidation Loan

A debt consolidation loan is a large loan taken out to pay off other loans and credit cards.

consumer signing debt consolidation loan

If you already have a lot of debt, and the monthly repayments are eating through your cash, a debt consolidation loan may be able to reduce some of the burdens. Using a larger loan over a longer period of time means that the overall interest repayments will be higher, but the monthly repayments will come down.

This means that you are more likely to be able to pay off all the debts, even if takes a little longer. In addition, you may be able to find a better interest rate than some of the loans you are currently paying off.

6. Peer-To-Peer Loans

If a bank won’t lend you money, you might be able to find some people who will.

Peer-to-peer loans are really just a way of connecting people who want to lend some money for profit and people who want to borrow some. Through peer-to-peer lending websites, people can apply to borrow from a group of people who want to invest.

Since this is dealing with real humans, unlike a bank, you may have the opportunity to explain why your credit is bad. And the fees and interest rates can also be lower than many banks, although they can also be much higher.

In addition, you won’t get your money instantly like through a bank. It can sometimes take up to two weeks.

7. Secured Loan

A secured loan means that you put something of value up as collateral.

A secured loan is similar to a home equity loan. Pledging a valuable item such as a car to secure your loan will more likely result in a loan approval. With collateral pledged the risk for the lender is much reduced. It also means good interest rates and good length terms.

You are putting your assets at risk, however. If you cannot repay the loan, your lender may seize the collateral.

8. Co-Signed Loans

A co-signed loan is one taken out with the agreement of someone with a good credit score.

If you fail to repay the loan, the co-signer becomes responsible for paying off your debt. So you will need to find someone who trusts you to be able to pay it off, such as a family member or friend.

handshake on loan deal

Again, since the risk is reduced for the lender, you are more likely to be accepted. But if things go wrong, you could ruin a relationship as well as someone else’s credit score.

9. Family Loans

If you have run out of other options, you could consider a family loan.

Of course, this is dependent on having family members with money to spare who trust you to repay it. But your credit score becomes irrelevant, and you will be likely to get a great rate of interest. You may even have to pay no interest at all.

It is unlikely that a family member would loan you a large amount, however, and like with co-signed loans, you are potentially putting an important relationship at risk.

Want to Know More About Loans for People with Credit Problems?

These are just some of the options available for loans for people with credit problems.

But remember, before taking out any loans, you need to consider whether it’s suitable for your needs and whether you can actually afford to pay it back. It is always advisable to seek expert advice before taking out any loan.

If you would like more information on the options available to you, then please don’t hesitate to contact us

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