9 Bad Credit Loans No One Wants To Tell You About

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If you’re looking for a personal loan for an emergency expense or other use but have bad credit, you may find it hard to find an affordable lending option. That doesn’t mean you should give up, as several lenders offer bad credit loans.

What Is Considered a Bad Credit Score?

Before we tell you more about bad credit loans that no one wants to tell you about, let’s first understand what is considered a bad credit score. Usually, credit scores range from 300 to 850. Even though there is no official score to what’s regarded as a bad credit score, it’s generally agreed that any score below 600 is considered “high risk”.

Bad Credit Loans Options

Many regional and big commercial banks don’t compromise on credit scores when giving out loans. So, don’t bother with them unless you have taken time to improve your overall credit score. If you don’t have time to improve your credit score, you may need to consider the options below:

1. Credit Union Loans

You are more likely to gain the trust and confidence of a credit union compared to a community bank. A credit union, especially a community-based, or one associated with your employer, is more likely to look beyond your bad credit history and decide based on your character and your promise to pay back in time.

The promising aspect of these credit union loans is that their interest rates are very low, applicable to anyone with a bad credit score, compared to the interest rates of acquiring the same loan from a bank. For instance, if you are a veteran looking for a personal loan in Florida, you can secure a loan from PenFed Credit Union or the Navy Federal Credit Union.

If you are not a veteran, several other credit unions offer all types of FL loans.

2. Loans From Friends or Family 

Your family and friends are more likely to lend you and charge you a lower interest rate than a traditional bank. And more than likely, they are not going to take you through a lengthy qualifying process.

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However, you need to be more cautious when taking a loan from family and friends. Treat these loans as a business between you and a stranger. It implies that it should be formalized with proper documentation and legally recorded.

To avoid future confrontations with people you know, create a written contract with an exact loan amount, loan terms, and the consequences of contravening the agreement.

3. Co-Signer Loans

If you don’t want to get a loan from friends and family, you can consider a co-signer. Here you need to reach out to someone with a good credit score and request them to co-sign a loan for you. With the co-signer option, the lender can set the terms of a loan based on the co-signer’s credit score.

Keep in mind, the co-signer will be equally responsible for the loan repayments.

The repayment information is recorded both in your credit report and your co-signer’s credit report. This way, both of you will be on the hook if there are late payments or possible default. Consequently, timely payments will improve your score and chances of securing future loans without a co-signer.

4. Home Equity Loans

You can also apply for a Home Equity Line Of Credit (HELOC) or a home equity loan if you have equity in your home. In this case, your home will be used as collateral regardless of your credit score.

The interest rates of HELOC loans are lower because the loan is secured. Although this happens to be the most inexpensive way of borrowing from a reputable lender, you must keep in mind that this can put your home in jeopardy if you have an issue repaying the debt. You are required to have a reliable income and be disciplined enough to repay your loan in time.

5. Peer-to-Peer Lending (P2P)

Peer-to-peer lending is an online platform that allows an individual to secure a bad credit loan from another individual or group of individuals not associated with an institution. The borrower posts a loan list on P2P websites, and investors choose which borrowers they wish to fund.

Although credit scores are considered, P2P loans are more readily available for individuals with bad credit. Lending standards are lenient, and the interest rates are often lower than those of traditional lenders.

6. Online Personal Loans

Technological advancement and loan demands have opened the door for Personal Loan Lenders. It has come to fill the gap of lending individuals with low credit scores. These lenders are banks or financial institutions with no physical offices.

In most cases, the lenders have their own way of scoring the borrowers in terms of income and level of education. One of the advantages of online personal loans is the short turnaround time and no application fee.

7. Unsecured vs. Secured Bad Credit Loans

Secured loans lend a large amount of money with better terms and lower interest rates than unsecured loans. You will, however, have to give out your assets as collateral to qualify for a secured loan. Some banks can offer you secured loans based on the amount you have in a savings account or the value of any stock you own – despite your low credit score.

On the other hand, an unsecured loan substitutes assets with a promise to repay and it is more difficult to get from most banks. Banks only give unsecured loans to their best customers. This loan type has no risk to the borrower but has a higher risk to the bank.

8. Loans After Bank Negotiation Agreement

If you have a bad credit score but have been loyal to your bank, you may qualify for a bad credit loan. Here, you will need to have a formal agreement with your bank to qualify for a short-term bad credit loan. 

9. Cash Advance

It is sometimes referred to as an overdraft. It is a loan using your credit card or withdrawing more than you have in your bank account and will charge you high interest rates. It cripples the borrower and is only advisable when it’s the only option in moments of urgency.

As you can see, there are several bad credit score loan options you can consider. However, it’s advisable to clean your credit score to increase your chances of securing such loans.