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If You Have Bad Credit, Here are Your Loan Options

Publish date: Thu, 05 Mar 2020, 09:20 PM
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General investment news and blog posts

Applying for loans can help you during a financial crisis. It takes off the burden of having to deal with where to get the money when you need it. Other than that, you don’t need to repay the loans in one go. You have to make sure you follow through and return the money when you have to.

However, it’s another story when you have bad credit. Banks and lenders often look into your credit score and history before letting you borrow their money. If you have a poor rating and questionable history, you will less likely have your application approved.

So does this mean you lose your only chance at financial relief? The answer is no. There is still one type of loan you can apply for.

What are Bad Credit Loans?

Bad credit loan is an umbrella term for loans that can be taken despite a bad credit score. A person’s credit score is determined by their credit history. FICO, the company dedicated to doing this task, will sort through a person’s credit history and score it.

Good credit history will lead to a good credit score. Borrowers with a score ranging from 700 to 800 would be able to apply for a loan with no problem. Anything that is below 669 is considered a fair or unsatisfactory rating. Lower than that, and institutions would turn you away even before you plead your case.

If you have a bad credit score, your best option is to take a loan under bad credit loans. These types of loans won’t rely on your credit score or history alone. As long as you can prove to the people you’re borrowing from that you can face your responsibilities, you will be granted the money.

Different Types of Bad Credit Loans

Here are your loan options:

Personal Loans

Personal loans are a popular option for people with bad credit. It’s even a popular type of loan for people with good credit. It’s relatively easy to apply for, especially when you require an urgent loan.

Personal loans can be used in almost anything. From medical emergencies to vacation expenses, lenders would hardly scrutinize what you need it for. Credit score and history have minimal impact on the process and is just a part of it. However, the interest rate can be affected by this.

Interest rates can range from 6% to 36%. Higher credit score means you can get a lower interest rate, while lower scores will mean that the chances of you getting a lower interest rate can be little to none. Payment is fixed, however, so you will know how much you will pay even before signing a contract.

Payday Loans

A payday loan is an unsecured, short-term borrowing loan that has higher interest rates compared to other loans, still dependent on your income and credit history. Because of its high interest, some people consider payday loans as predatory, sometimes with hidden provisions that can charge borrowers with fees. APR can reach up to 500%.

Payday Loans, just like personal loans, don’t need your plans to be elaborated. You just need to pay the loan in full on your next paycheck, hence the name. It can be a challenge paying for them, especially if you haven’t contemplated it.

Peer-to-Peer Lending

Peer-To-Peer lending, or P2P, allows borrowers to loan money directly from other individuals. Sometimes called social lending, P2P has existed since 2005, and is slowly gaining popularity with borrowers. Because of this, many websites have started offering this type of funding.

P2P cuts out the intermediary and directly connects borrowers with investors. Rates are determined depending on the institution, as with the terms. Your creditworthiness will directly affect the rates given to you.

Bad Credit Installment Loans

Installment loans are a loan where you can borrow an amount of money and are expected to pay it back on a fixed period. It’s called such because the payment for it is called installments. Just like most of the list, this is a relatively easy loan to apply for, with rates determined on how good your credit profile is. 

Title Loans

A title loan is a type of secured loan where your properties can be used as collateral. This is a popular option because it doesn’t consider your credit score, and it has lenient application requirements. Approval of application can be done quickly, especially for loans with lower amounts.

It might look like it’s a good idea to apply for one. However, borrowers must be aware of the inflated costs that come with title loans. An average APR of, say, for example, a car title loan can reach as high as 300%, and doesn’t go lower than 100% when it comes to interest rates. It is also considered a predatory loan.


Bad credit isn’t the end for borrowers who had the misfortune of having one. Many lenders out there still offer deals that can give borrowers quick financial relief. However, these borrowers must remember that lenders would take steps to ensure that their money won’t be run off to collections. It is up to these individuals to find loans that wouldn’t drown them with expensive lending fees.


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