8 Loans if You Have Bad Credit
When you hear the term “bad credit,” it is usually referencing an individual’s FICO score. Your FICO credit score is partially based on your credit history, including but not limited to bill payment history, current and past loans, current debt, and even how much money you make. This scoring model ranges from 300-850 and classifies poor credit as being 579 or below.
If possible, you may be better off minimizing the amount that you borrow until your credit score shows signs of improvement. Unfortunately, this is not always an option for people who find themselves in times of unexpected financial strain, and absolutely need a loan.
This is where direct lender installment loans for bad credit come into play. With these types of loans, a lender may be more likely to approve your loan given your credit score, but they may come with higher interest rates or fees.
Here are some other types of loans that may provide assistance if you find yourself in an unexpected financial crisis and have bad credit.
1. VA Home Loan
A VA home loan is a program designed to help veterans become homeowners. Although the VA does not supply the loan, they act as a co-signer for the veteran. This enables the veteran to obtain a guaranteed amount and interest rate regardless of having bad credit.
2. Secured Personal Loans
Having a secured personal loan means you have collateral that equals the amount that you borrow and that the lender can seize if a default should occur by you. Examples of personal loans include auto loan and mortgages.
In some instances, you may obtain a secured personal loan through a bank, online lenders, or credit unions, where the borrower borrows against a personal asset such as savings or an automobile. These loan types tend to carry lower interest rates compared to unsecured loans due to the lower risk involved.
3. Fixed-Rate Loans
Having a fixed-rate loan when you have bad credit may require you to make a down payment to secure the amount of your loan and rate. Having a fixed-rate loan is perfect for having monthly payments made that are consistent. This loan type also allows you to budget better thus helping you to change your spending habits and improving your bad credit.
4. Variable-Rate Loans
A variable-rate loan carries an interest rate that is tied to a bank rate called benchmark. As a benchmark rate fluctuates, your loan rate, total interest, and payment amount also fluctuates.
A benefit of a variable-rate loan includes an APR that is usually lower than what a fixed-rate loan has. Another benefit includes a possible cap on the rate and the number of times it can change over a certain amount of time as well as the amount of time of the loan.
It can make sense to have a variable-rate loan if your term is short-term because the rates could become higher, but may stay the same if the loan is short-term.
5. Debt Consolidation Loans
A debt consolidation loan gathers all of your debts into one combined loan. This type of loan usually has an APR that is lower so that you are able to save money because of the interest. When you consolidate you simplify all of your debts payments by creating only one payment per month.
6. Co-Sign Loans
A co-sign loan specifically targets borrowers with bad or no credit history who would not be approved if they applied alone. When a co-signer is used they act as a promise that the loan will be paid in accordance with the terms and amount if the borrower is unable to.
When a co-signer is used and their credit is strong then your chances for qualifying improve thus allowing you to secure loan terms that are favorable and a rate that is lower.
7. Personal Line of Credit
When you obtain a line of credit you have revolving credit which acts like a credit card. So instead of getting a cash loan, you have a credit amount that you borrow from whenever the need arises. You then make payments only on the amount that is borrowed.
This loan type works best for when you have times of emergency or for expenses that are ongoing, instead of an expense that is one-time.
8. Payday Loans
Another type of unsecured loan is a payday loan, which is normally repaid on a borrower’s payday. Payday loans are designed for convenient repayment because in some instances, they can be repaid by simply having a borrower’s predated check deposited. The loan amounts can be low and average around a couple of hundred dollars.