Types of Bad Credit Loans
Getting a loan when you have a poor credit rating can b e challenging to say the least. Banks rely heavily on your credit score when determining whether or n ot you are eligible, and if you have a low score, chances are you will be denied. When this happens, the re are a few options out there that can help. There are many lenders that cater to people with bad credit ratings, but not all of them are good options. Below are some of the most common bad credi t loan options, and whether or not they would be right for you. Read over this information before you make a decision on what type of loan to get.
1. Payday Loan
– If there is any type of bad credit loan th at you should avoid, it is this kind. In theory a Payday loan sounds great, but it can actually be quite difficult to manage. With a payday loan you are supposed to borrow a small amount of mo ney that you pay back in a couple of weeks. It is just supposed to hold you over until yo ur next payday. However, because these loans are being given to people with bad credit, and bec ause they are over such a short period of time, the interest rates are normally very hi gh. You could end up owing an amount that you can't pay back if you are not careful. If you decide th at you are going with a payday loan, be sure that you plan out all of your expenses beforehand a nd know what you are going to owe, that way you won't be caught be surprise.
2. Guarantor Loan
– If you don't want to use your credit sc ore to get a loan, then perhaps you can use someone else's. With a guarantor loan you ask someone close to you, usually a family member, to vouch for you. They sign the loan agreement w ith you, and use their good credit score to secure you a better loan. All of the payments still go through you, and the only time the guarantor has to get involved after the initial paperwork is if you fail to meet your payments. This is the biggest downside of guarantor loans. If you can't pay back the loan, not only are you putting a big financial burden on a family member, but you coul d be damaging that relationship as well. Think carefully about who you want to be your guara ntor, and if you will be able to repay the loan before you sign up.
3. Logbook Loan
– Lastly, if you want to use something as co llateral to get yourself a lower interest rate, and you are the legal owner of a vehicle , you can get a logbook loan. With a logbook loan you can borrow against your car, getting a sm all loan for a relatively short period of time. Since you are using collateral, the interest rate will be lower than if you went with another type of loan. Best of all is that you get to ke ep driving your vehicle while the loan is out, so you don't have to worry about it interfering wi th your daily life. Logbook loans are generally easy to get, and the money is delivered to you withi n a day. Just be careful that you don't miss any payments, because if you miss too many you c ould lose your vehicle.
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