Typically, most loans are approved because the person has a high credit score. While the credit score is the traditional method for approving loans, the modern private lending market is more dynamic. Companies have been trying to take advantage of the market and demand from borrowers who need money but don’t have a good credit score. Whether you’re looking to borrow money in Charleston or need to find local loans in San Diego, Chicago, New York, or another financial center, a high credit score isn’t needed to get approved for a loan. Below are five loans you can take out with bad credit.
One loan that doesn’t require a credit check at all is federal student loans. While student loans are infamous for leaving newly graduated students with debt, if you need money to get through school and don’t have credit history or a good score you can receive funds through a student loan. Of course, it’s very necessary to pay back the money you borrow as soon as possible. Even if you don’t need money for tuition, you can obtain a student loan without a good credit score.
Credit Starter Loans
It’s possible to turn bad credit (or no credit at all) into good credit. How? One way is to take out small credit starter — also known as credit builder — loans. Here’s an example of how this works: Let’s say you live in Springfield, Missouri. Go online and look for loans in Springfield MO. Of the companies you find there, look for one that offers “installment loans.” It’s important to verify that the lender you pick will report your interaction to the credit bureaus so that you can rebuild your credit. Once you have found one of these lenders, take out a small credit starter loan and then make all of your payments in full and on time.That last part is incredibly important. You must make all of your payments in full and on time!
Loans to purchase an automobile are another type that you can get without a high credit score. This is because if you fail to pay the payments on time, the lender may repossess the vehicle from you. Another option would be to offer a vehicle as collateral. Each dealership and lender will have their own stipulations and qualifications necessary to rent a car, if you meet the debt-to-income requirements and pay a large down payment, you may be able to be approved for an auto loan. Since it is a loan without a specific purpose, the lenders can take the car if you don’t pay them. It’s always important to make your payments on time, but it is especially pivotal when it is a loan you used to purchase a car.
While payday loans don’t have a great reputation, they can be a good option when you need money fast. These short-term, low-dollar loans allow you to repay them after your next paycheck. It buys you some time when you need money before you get paid, but payday loans won’t fix your financial woes. They usually have very high interest rates and large penalty fees should you miss a payment. Payday loans should be a last resort — please see our article on the mistakes you should avoid when applying for one of these loans.
Home Equity Loans
Finally, home equity loans are a type of lending that you may be able to access with bad credit. When you have enough equity in your home, which is the market value minus your remaining mortgage, you might be able to access a home equity loan that hinges the money you borrow on your property. Like an auto loan, the lender may be able to repossess your house if you fail to pay the lender back. Home equity loans can be a good option when there are no others, but you should pay close attention to the terms and understand what you are risking.
The loan business is complicated. No longer do you have to have a high credit score to access funds. Still, it is necessary to provide collateral for many of these loans. While every lender is different and has their own requirements, if you fail to pay many of these loans the consequences are significant. That’s why, whatever your situation, it is imperative to pay back your loans as soon as possible. If you have bad credit and get approved for a loan, you might be able to raise your score by paying the money back immediately. The good news is, you have options.