In today’s financial world dominated by credit scores and cash, many people struggle to find financial relief. And as you could probably guess, individuals with bad credit rankings fall into this category.
If you have less than perfect credit or even bad credit, getting approved for a loan can be difficult. Most lending institutions will turn you away based on nothing more than your credit score.
Loan Options for Bad Credit
When the economy is not doing well, and when unemployment rates are high, banks become even more stringent about lending money and approving loans. The interest rates tend to increase, making it even harder for those with bad credit to survive.
The good news is that there are still options available for those with bad credit who need to finance an item they wish to purchase, whether it’s a car, home, or something else. With the rise in popularity of peer-to-peer lending platforms, more and more people are getting loans at the rates they can afford – regardless of their credit history.
For instance, many are opting for installment loans for bad credit. But if you’re considering getting a different loan for bad credit, there are many available on the market. Here are some of them.
Credit Union Loan
A credit union loan is a good alternative if you’re looking for a loan while having bad credit. Generally, a credit union loan has a lower interest rate and better loan terms. Credit unions typically offer the same loan products as a bank, like personal loans, credit cards, etc.
They even offer the same services such as access to an ATM, cards, mobile banking, etc. The only difference between the two is that banks are financial institutions that aim to profit from their clients, and credit union loans are more interested in making their members happy.
The best thing about credit unions is that since they are nonprofit organizations, they tend to pass their savings along to their members in the form of discounts, higher interest on their members’ savings accounts, or lower interest in their loans.
Pretty good, right? However, to enjoy these benefits, you have to join a credit union first, and they have pretty strict requirements for their potential members.
After joining the organization, you may have to meet specific requirements first before doing any transaction within the organization. Typically, they require a certain amount of deposit or time to join the organization. Quite strict, but if you’re able to join and be a member for some time, you may enjoy these benefits and more. Not to mention you’ll make a lot of connections with the people in the group that can help you with your financial troubles.
P2P lending is a relatively new approach to the loan industry. By cutting out traditional banks and lenders, borrowers may be allowed to get cash quickly and invest money in loans.
So how does it work? P2P lending is an online system where individual investors may fund loans that others need.
Both borrowers and lenders can benefit from this system. Borrowers will be able to get loans that they can’t get from traditional banks and lenders, and investors will be able to lend their money in exchange for a hefty return.
This service uses online software to match lenders with potential borrowers. Borrowers fill out an application and review their interest rates once they get approved.
After that, it takes the loan to the funding stage, where investors look at your listing and decide if they want to fund it. After getting picked, you will then move on to the repayment stage until you repay your loan in full.
Home Equity Loan
A home equity loan is a type of consumer loan that allows homeowners to take out a loan against the equity from their homes. The amount of money you can borrow is based on the difference between your home’s current value in the market and the balance you have left. Essentially, a home equity loan is similar to a mortgage; that’s why people call it a second mortgage.
It works the same way – as you’re given the loan, you’ll pay for monthly along with your original mortgage. However, the major risk it has is that if you fail to repay the loan, you can lose your home. It’s a good alternative for bad credit loans, but you have to make sure you can repay them.
There are many more types of loans in the market that can help you get funds, even with a poor credit score. Most of them have higher interest rates and shorter loan terms, but you have to understand; it’s a huge risk for the lenders. If you’re lucky enough, you might find something with a lower interest. But if you’re looking for something more official, try the ones listed above.