How’s your credit score? Are you scared to check?
If you have less than perfect credit, you’re not alone. About 30% of Americans are just as disappointed with their bad credit score.
Most of the time, your credit score probably doesn’t really affect you. It could be 590 or 810 and it’s all the same to you.
But when you need to take out a loan, that innocuous little number suddenly becomes pretty important.
You might think that you can’t get a loan because of your score. But that isn’t true. Check out these 8 loans for bad credit that you can get even if your score isn’t ideal.
1. Payday Loans
When you just need a bit of cash to get you through until your next payday, a payday loan can be a good option. Payday loans are typically smaller, often begin capped around $1000.
Repayment terms are short and interest rates are high. This loan is not the type of loan you’ll carry for long-term. Instead, as the name suggests, it’s a quick loan you can get and pay back with your next payday.
The big advantage is that they are generally easy to get approved for and quick to fund. When you’re in a bind a payday loan can get you out.
2. Employer Emergency Loans
Some companies will offer what is essentially a cash advance on your salary. This type of loan works similarly to a payday loan but is instead offered by your employer.
Loan amounts are often capped at a certain percentage of your paycheck.
3. 401K Loans
You may also be able to get a loan from your future self. Some 401K plans, HSA accounts, or IRAs will let you take a loan out of what you have contributed to it.
This is a good option because the interest rates tend to be lower on this type of loan. The repayment period may still be relatively short so be aware of that.
4. Military Loans
As with a civilian employer, you may be able to request a loan on your future earnings as an active military service member. As government-backed loans, the interest rates are often more competitive than other options you may have.
You can even get a special VA loan for a house if you’re trying to get a mortgage. Play your cards right and you might even be able to use this option for your fix-and-flip house project.
Keep in mind you usually have to be either actively serving or honorably discharged to qualify for this type of benefit.
5. Home Equity Loans
If you already own your home and have built up some equity in it, you’re sitting on a gold mine. You can get a Home Equity Loan or take out a Home Equity Line of Credit, or HELOC. The main difference between the two is that a loan works like a normal installment loan and the line of credit is revolving like a credit card.
As far as competitive interest rates and favorable repayment terms go, this is an excellent option. Because you’re basically putting your home up as collateral the lender is willing to give you a better rate, even though your credit score is bad.
However, the downside is that your house is on the line if you default on the loan. Only go for this option if you are sure that you will be able to repay the loan in accordance with the terms.
6. Peer-to-Peer Loans
Online peer-to-peer lending platforms are becoming a popular option for personal loans. You can generally take out amounts up to $35,000 or even $40,000.
What is peer-to-peer lending? It’s a platform where regular everyday investors can fund loans to everyday borrowers like yourself. While the platform will take a cut, it still can be a more cost-effective way of borrowing because you’re cutting out the big bank in the middle.
However, be sure to read the fine print. Sometimes the interest rates for people with bad credit can be undesirably high. That’s because investors won’t be willing to take a chance on you unless the potential rewards are relatively high.
Peer-to-peer platforms aren’t the only way to get an online loan. To learn more about other online loan options, be sure to check out this helpful article.
7. Co-Signed Loans
To get a better rate on a loan, you can try to get a co-signer. This is a great way to drastically lower the interest rate that lenders will be willing to offer you.
How does it work? You simply ask a friend or relative with good credit to co-sign on a loan with you. They’re promising the lender that if you default on the loan, they will honor the loan and repay it.
However, tread carefully with this. Many relationships have been ruined over money troubles. If you don’t pay on the loan, your friend or relative may become angry with you. It isn’t worth losing a good friendship over money troubles.
8. Friends and Family Loans
Rather than asking a friend or family member to co-sign, you may be able to ask for a loan directly from them. This will depend on how much you need and they’re ability/willingness to fund your whole loan.
If you do go this route, we recommend fully writing out the terms of the loan and signing it. This helps to avoid misunderstandings or problems with repayment in the future.
This type of loan holds the same relationship risk as the co-signing option. Be sure that you’ll be able to pay back the loan before going this route.
The Best Loans for Bad Credit
This list doesn’t even encompass all the loans for bad credit options that are out there. Don’t think that just because your score isn’t as ideal as you would like it to be that you can’t get the money you need in an emergency.
Remember too that by taking out a new loan and paying it off on time you’ll help to boost your credit score in the future. However, tread carefully. The opposite is also true. If you don’t pay the loan off in accordance with the terms, your credit score could fall even lower.
For more great lifestyle tips be sure to check out the other posts on our blog!