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Alternative loans if you have bad credit

Bad credit loans are designed for people who have credit scores that are less than stellar or  have little to no credit history. However, even if they are still eligible for a loan, that doesn’t mean that they’re not subjected to interest rates and repayment terms. It’s the opposite. 

Since they have little to no credit history or have bad credit scores, lenders will be giving them loans with a higher interest rate and a lower borrowing limit. You might think that this is unfair, but it’s not. 

For lenders, people on the lower scale in terms of credit score have a bigger chance of default, which is why they outweigh the risks with a higher interest rate and lower borrowing limit.

What is bad credit?

Having bad credit means that lenders and other financial institutions negatively view you as a borrower. With this negative view, you’ll find it harder to find a conventional loan, or if you manage to find one, it’ll most likely have a higher interest rate and lower borrowing limit. 

However, you should note that each company or financial institution has different ways of assessing you as a borrower. That said, you can get an idea of how different companies might assess your credit report. 

For example, if your credit score is low, there are several reasons you should consider: 

  • Late payments
  • County court judgments
  • IVA, DMP, or DRO
  • Hard searches
  • Defaults
  • Bankruptcy
  • Little to no credit history

Fortunately, many financial institutions and lenders are willing to let you borrow a loan even if you have bad credit. They offer bad credit loans or loans that are not in the traditional sense. 

Here are some of them:

Online Loans

Online loans have been around for quite some time. That said, if you want to take out a loan without setting foot inside a bank, then online loans are for you. You can get them from online lenders. Fortunately, there are many of them just floating around the internet. 

There are many good choices, but of course, since it’s the internet, there are a few bad apples. Don’t worry, though, as these cases are in the minority.

So how do they work? 

They work pretty much like a traditional loan except for a few caveats. First, the application is quick and easy to understand, and the approval is also fast so that you can get the money as early as the next few days – some even on the same day. Not only that, but they can also be negotiated with, especially if you know the lender quite personally. 

Some online lenders even accept cashier’s checks or money orders for your monthly payments, especially CreditNinja. If you’re wondering what the difference is between the two, CreditNinja teaches us the difference between a money order and cashier’s check.

Cash Advance

If you need a not-so-huge lump of money fast, then you should try cash advance. A cash advance is a short-term loan from the bank or an alternate lender. If you have a credit card, you can also get a cash advance with your credit card balance. However, cash advances can have steep rates and processing fees, but you should consider cash advances if you want quick approval.

Credit card cash advance is one of the most popular types of cash advances. If you already have a credit card, then you don’t need to get approval from your bank or lender. Just submit a request and pay for the fees. 

Once you’re done with both of those, the lender would then give you the money via a check or through the ATM. However, as mentioned earlier, they are quite pricey. The interest rate is usually 24%, which is higher by 9% in regular cash purchases. Also, the interest would accumulate pretty quickly, and there’s no grace period.

Not only that, but the cash advance would hold a separate balance from your credit card balance. Fortunately, you can pay for both of them through the same online payment. Typically, credit card cash advances have no promotions like no or low-interest rate introductory offers. But, on the other hand, they are still quick and easy to obtain.

Credit Unions

Credit unions are community finance organizations that are run by and for their members. Usually, the membership would cost a little bit, but you can enjoy some of its features like its loan offers. Typically credit unions would accumulate money through their members that they will offer to give back in a loan. 

Luckily, if you’re already a member for quite some time, you can take out a loan. The interest rate is not too high, and there are no fees and penalties either. Most loans’ repayment duration can even go up to 10 years.

Final Thoughts

If you have bad credit or have little to no credit history, you should not lose hope. There are a lot of financial institutions that can help you financially. Sure, they may offer you a loan with a higher interest rate and lower borrowing limit, but you can still negotiate with them and come to reasonably better terms. You just have to find a lender that is willing to listen.

Categories: Life