Types of Loans

Your credit score still matters in the lending industry. The better your credit score, the more loan options are available for you. However, a bad credit does not really hinder you from getting a loan. While a bad credit rating tells lenders that you are an untrustworthy customer, there are lenders who are willing to take the risk of giving you the loan.

For one reason, a bad credit does not necessarily mean that you’ve neglected your financial responsibilities. There are also acceptable situations that may have caused your bad credit, such as divorce, loss of a family member, temporary job loss or injuries/accident. If this is your case, more lenders may be willing to work with you.

Loans for People with Bad Credit Types

Unsecured Loans for People with Bad Credit

There are several types of unsecured bad credit loans you can take when you have bad credit. These are loans that do not require you to present collateral as payment for your debt in the event that you default on your loan payments.

Cash advances/ payday loans – Cash advances and payday loans are designed for very urgent financial problems that occur in between your paydays. Do you have a medical emergency but your insurance does not cover it? Does your car need an urgent repair so you can go to work? When you do not have the funds prepared for such situations, getting cash advances/ payday loans can help you get through the crisis. Keep in mind though that cash advances/payday loans are short-term loans and have to be paid back in full when your next paycheck arrives.

Bad credit cards- You can also get bad credit cards, which work like regular credit cards. The only difference is that credit cards for people with bad credit charge higher interest rates. This can be a great option to use for emergencies. The best thing about this option is that it is always available to use anytime you need it, provided that you don’t max out your credit limit.

Personal loans for people with bad credit- Many lenders may be willing to give you a loan even if you have bad credit as long as you can demonstrate your capability of paying them back. Personal loans may be similar to payday loans in the sense that these loans are supported by your income. The only difference is that payday loans are short-term and personal loans can have more flexible or longer term.

Secured Loans for People with Bad Credit

Contrary to unsecured loans, secured loans for people with bad credit are collateral-backed loans.

Title loans- Title loans are loans for which you present a title of an asset to back your loan. The asset can be a vehicle (truck, auto, boat), real estate property such as house, commercial building or lot. You can borrow more money through these loans and the term can be flexible or longer lasting for months to years. Because you are presenting collateral as payment for your loan in the event that you default on the payments, lenders may be willing to give you better loan interest rates.

Secured credit cards- If you find it difficult to get unsecured credit cards for some reason, another option would be to get secured credit cards. The “security” required here is in the form of a cash deposit which your lender will lock up until you cancel your card.

Guarantor loans- This loan requires a guarantor who pledges to pay for your loan in the event of payment default. The guarantor is putting his/her credit score as security and may also be required to present collateral.
There are certainly different types of loans available for people with bad credit. These loans differ from each other so it’s necessary to be discerning of what these loans offer and which one fits your financial situation.