Bad credit loan – Types, features and ways to get it
If you have recently missed payments or have been late in paying your credit bills, it has adversely affected your credit score. If you want to take a new loan and getting continuously refused by lenders, due to your poor credit, you do not have to lose heart, because there are certain options by which you can get a bad credit loan.
How to get bad credit loan
You can get ad credit loan from different banks, credit unions and some non banking financial institutions. As most of the lenders are not ready to offer loans to individuals, having bad credit, especially after the recession of 2007, some may do so, but with very high interest rate. He may also want some additional security to minimize his risk of losing the money, in case you fail to repay the loan.
There are certain lending institutions that may offer you loan, in spite of having a credit score as low as 580. There are some lenders who will agree to give you the loan, provided you can make a payment of at least $1000 every month. You should also have to be an American citizen and your age should be at least 18 years.
Types of bad credit loans
There are basically 2 types of bad credit loans. These are:
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Secured bad credit loans: You can get this loan against collateral that will be equivalent to the loan amount you will take. After the full repayment of the loan, the security will be returned to you, however, if you fail to repay, the collateral will be taken away by the lender. You can borrow 125% of the collateral amount. The amortization period of this type of loan can be as high as 25 years.
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Unsecured bad credit loans: In case of unsecured loan, you do not have to put up any collateral. But, this type is almost not offered by lender to people having bad credit.
Important features of bad credit loans
Some important aspects of bad credit loans are:
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You can get a bad credit loan, at very high interest rate and by providing security, which will be equivalent to the loan amount. You can get 125% of the value of collateral provided by you.
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If you have recently lost your job or relocated to some other locality or lost a considerable amount of money due to marital alimony or child support, there is high chance of getting your loan application turned down.
Alternative options for bad credit loan
You can also get a loan, by the following options:
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Credit cards: You can opt for credit cards. These credit cards are more or less similar to the normal credit cards; but have higher interest rates, as you have bad credit score.
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Prepaid credit cards: You will be required to fill the card before he you can use it. This limits the amount of expenses made by you.
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Joint credit cards: Certain banks will allow you to have joint credit cards, with some other person, who has good credit. That person can apply for a loan.
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Re-mortgage: If you own a home, you can get a loan by using it. Instead of applying for a loan, you can re-mortgage your house.
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Payday loans: You can get a payday loan, in spite of having bad credit. You can take a limited loan amount and have to repay the lender from your following month’s paycheck.
If you are already passing through a hard financial time and getting poor credit score, it will not be very wise to get a fresh bad credit loan and increase your trouble. Instead of applying for a new loan, you can consider opting for a debt relief program and get rid of your debts.
Related sites:
www.badloans.org – Loans for People with Bad Credit.