Approximately 16% of American citizens have bad credit, which is unsurprising as only 23% of Americans being debt-free. Having a bad credit score can affect many aspects of your life, from how easily you can borrow money, how easy it may be when you come to secure a rental property, take out a new mobile contract to even whether you’ll be accepted for a new job.
A bad credit score will also affect how likely you can receive a loan. However, there are alternative loan options available for those with bad or very bad credit scores. There are a number of lenders in the USA who can help people with bad credit and even people with very bad credit. Sometimes, it may simply be the case that a borrower needs a simple $500 loan to get through a month, but many lenders won’t lend them the money they need, when they need it. This can lead to further debt and money problems.
Read our guide to find out which loans are best for people with bad credit.
Why Is It Hard for People With Bad Credit to Get a Loan?
When applying for any loan, whether it is a payday loan, cash advance online, installment loan or something else, lenders will look at your credit score to determine how likely you are to repay the loan. Having a poor credit score history will evidently affect how likely you are to be accepted for a loan. Before you apply for a payday loan or any short term loan, there are a number of considerations you should make and steps you may wish to take to improve your chances of acceptance and suitability for the loan you need.
A bad credit score can be affected by a variety of factors, such as missing loan payments or defaulting on a loan. For whatever reason you may have a bad credit score, having one will indicate to lenders that you are a riskier borrower.
Not having a credit history will also likely affect how easily you can get a loan. Nonetheless, there are bad credit loans available for those with poor credit scores or financial histories.
What Loans Can I Get with Bad Credit?
Bad credit loans are designed for people with poor credit. While it depends on the lender, many bad credit loans will have higher interest rates and potential restrictions over what you can use the loan for. This is usually the case to ensure that borrowers repay the loan on time, and avoid using the loan for any reason which may otherwise cause a bad credit score and cause them to spiral into further debt.
Nevertheless, there are online lending companies or loan matching services that will allow lenders to borrow a bad credit loan with lower interest rates and over longer periods of time. Bad credit loans can be used for financial emergencies, such as to pay one-off medical bills, or for unexpected expenses such as vehicle or home repairs.
While a bad credit loan may seem counterproductive for those already in debt or poor credit scores, taking one out could help rebuild your credit score. Repaying the loan on time and using it for appropriate payments could help get you back on track to a better credit score, and therefore help you in the future.
Likewise, it is important to check you can repay a bad credit loan before borrowing one. Using a loan to pay for ongoing debts is strongly advised against, as doing so could cause you to fall into further debt and credit score problems.
How Can I Apply for a Loan With Bad Credit?
You can apply for a bad credit loan either in-person or online. Many now opt for online lenders or loan matching services, as the application can be completed from the comfort of your own home.
When applying for a bad credit loan, you will have to provide certain personal and financial information to lenders. For instance, your name, address, age, current income and what type of loan you are applying for as well as how much and how long for.
Make sure to check you are borrowing from a trusted online site, as many Americans fall prey to many loan sharks every year. Lenders will also run eligibility and affordability checks to ensure you can borrow and repay the bad credit loan.
To be eligible for a bad credit loan in the US you must usually:
- Be 18 years old
- Have a stable income
- Live in the US
- Provide ID
What Loans Can I Get With Bad Credit?
There are many loans available for those with bad credit. Just like any other type of loan, they come in either secured or unsecured forms. Additionally, some short term and unsecured loans may be specifically tailored to be better suited to applicants with bad credit or poor credit scores. For example, you may find payday loans for bad credit or even bad credit installment loan options. These loans will specifically take in to account the credit score of an applicant assumed to have bad credit in the USA.
Below, we have a short list of some of the best types of loans for bad credit.
What Are The Best Types of Loans for Bad Credit?
Having bad credit doesn’t always mean you can’t get a loan. However, it does mean you should take your time to research which loan is best for you, whether you need to borrow $600 or borrow $2000, or perhaps more. Not every bad credit loan will suit your financial needs and you should only ever look to apply for a loan if you truly and absolutely need it for a financial emergency or urgent expense. That’s why, we’ve compiled a short list of 10 bad credit loans you may be eligible for.
Online Payday Loans
Payday loans online are a popular choice for those with bad credit. Experiencing debt can be a very stressful situation. A payday loan is usually easy to apply for and received fast, meaning you will receive the necessary funds before your next payday.
If you have very bad credit and have found yourself in a financial emergency, a payday loan could help you. You will receive the funding fast, meaning you can pay off any unexpected bill before falling into further debt. On your next payday, when you have the funds, you can then repay the loan. Payday loans will typically allow you to borrow up to $1000 or slightly more.
Bad Credit Loans
Bad credit loans are specifically designed for people with bad or very bad credit scores. Unlike payday loans, bad credit loans may have lower interest rates than other comparable products as they are designed for borrowers with financial problems. Additionally, bad credit loans can also be repaid over a longer period of time so may be a viable option if you need more time to save the money to repay.
An installment loan, in contrast, is a short term loan repaid over a longer period of time. Installment loans may enable you to borrow a slightly larger amount of money; as they can be repaid over a longer period of time, reducing the likelihood of a borrower not being able to repay their loan over the course of the repayment schedule. If you have bad credit, this may be a good option for you if you’re looking to consolidate your debt or pay for more long-term bills, such as medical or home bills.
Secured loans are a type of loan which require you to pledge an asset as collateral, such as a house or car. Secured loans are good for those experiencing very bad credit scores. Having a very bad credit score will likely affect how likely you are to get any type of loan, as it presents you as the riskiest type of borrower to lenders.
Secured loans, nonetheless, can still be applied for even if you have a very bad credit score. As you will be providing collateral, it will increase the likelihood of lenders lending to you, as their risk of not getting their money is reduced by the collateral put up by the borrower. Not repaying the loan, however, could lead to your asset being repossessed.
For those with little to no credit history, as well as those with bad or very bad credit scores, a guarantor loan is a good idea. A guarantor loan, as the name implies, is a loan which you can apply for by providing a guarantor. These loans may be used for expenses like utility bills and other pressing expenses which may be a little more than a few hundred dollars.
Whether a family member or friend, they will be required to act as a back-up if you cannot repay the loan. Therefore, it is important to keep in mind that missing or avoiding repayments will result in your guarantor paying for you and this may, if it is a close family member of friend, cause relationship problems.
Title Loans for Bad Credit
If you have a vehicle, then you could also apply for a title loan. Title loans are short term secured loans, which require you to provide your car title as a form of collateral when applying for money. Similar to other secured loan options like those secured against a property, a title loan means that your car or vehicle will act as collateral if you cannot repay the money. Hence, keep in mind that avoiding repayments will result in your vehicle being repossessed by the lender.
A salary advance is a type of short term loan. For those in regular employment, they can request a salary advance loan through their employer. If accepted, you will then be able to receive your next salary in advance, and then deduct this amount in your next payment.
Salary advances are great for those with very bad credit, as it means you will not have to go through any credit checks or pledge an asset like a house or car to borrow the amount of money you need. However, it is important to only borrow the money you need, as on your next paycheck you will need to deduct this money.
Utilizing Credit Cards
Credit cards are a very popular type of loan are are used by millions of Americans every single day. Contrary to popular belief, those with bad credit scores can still apply for credit cards. While your credit score may be reflected in the interest rates, having a credit card loan and using it correctly, could help you rebuild your credit score by demonstrating to lenders that you can be responsible with your money and with loans.
By using a credit card, you can pay for things you cannot afford on your own salary and then repay it accordingly. Paying the money back before accruing interest can help you rebuild your current credit score.
Cash Advance Loans
A cash advance loan is similar to a payday loan. You can borrow the amount of money you need over a short-period of time, potentially as much as a $5000 loan or perhaps more in some cases, then repay it usually by your next payday. Cash advance loans can help those in financial emergencies, and ensure they can afford to keep paying their other ongoing payments. These loans are often used by people who have bad credit when they need money fast for particularly pressing expenses and bills.
No Credit Check Loans
No credit check loans are a great option for those with both bad and very bad credit scores. As the name suggests, a no credit check loan has traditionally meant lenders will provide money to those without running any background credit checks.
Therefore, your current credit score will not worsen from credit checks. Similar to the other loans above, a no credit check loan is a type of short term personal loan used for unexpected expenses. Therefore, don’t borrow any credit check loans for any other ongoing debt you may have. However, no credit check loans in the USA are incredibly rare nowadays as lenders will always run some form of check to ensure affordability and creditworthiness. Instead, you may opt for alternative options like payday or installment loan options.
Which Loan Is Best for Bad Credit?
Choosing the right loan when you have bad credit is key. Before applying through a lender, make sure to research their reviews and how trustworthy of a company they are. If you’re considering a loan and have bad credit yet are unsure which to apply for, take into account how much money you need to borrow, how long for and what your current ongoing expenses cost. Each loan available will have its own advantages and disadvantages depending on your personal financial needs.