A good credit score is essential if you want to obtain a loan. No matter the size of your loan, or the reason for getting it, if you are going to a bank, you are going to need a decent credit score. Without one, they are most likely going to deny your loan application. While some of us have the time to work on our credit scores, and then reapply when they are in good standing again, many of us do not. We need to get the loan now in order to pay for things, and we do not have the months necessary to improve our credit ratings. If this is you, then there are a few alternative options you can consider. Below are some of the most common types of bad credit loans, and whether or not they would be right for you.
Logbook Loans – A logbook loan is when you use your vehicle as collateral. This may sound a little scary at first – especially if you use your car on a daily basis to get around – but it doesn’t have to be. With a logbook loan, you get to continue driving your car while the loan is out. The only time you run the risk of losing your vehicle is if you miss a couple of payments. In this case, if something can’t be worked out with the lender, then you may lose your vehicle. However, this is usually a worst-case scenario. Logbook loans are relatively easy to get, and since you are putting up collateral, the interest rates tend to be lower. If you have a car with some value on it, and need a loan quickly, a logbook loan could be the way to go.
Guarantor Loan – Why use your credit rating if you can use someone else’s? This is the thinking behind a guarantor loan, which allows someone else to vouch for you. Using their good credit rating, they can secure you a loan at a lower interest rate, but the payments are still sent to you. The only time the guarantor has to get involved after signing up is if you fail to meet your payments. Be wary of this as it will not only harm your guarantor’s credit rating (since they will be stuck with the loan), but it will most likely harm your relationship with them as well. Think carefully before you ask someone to be your guarantor, and ensure that you have the funds to pay back the loan on time.
Payday Loan – This last type of loan is just how the name sounds – a loan until you reach your next payday. These are designed to be quick loans for small amounts of money. However, since they are over a short period of time, and generally given to people with low credit ratings, the interest rates tend to be very high. Payday loans should be your last resort if nothing else is available. Many people have a hard time paying these loans back on time, so if you do decide to get one, be sure that you have planned out ahead of time and budgeted properly. If you can do that, then this quick, convenient loan may not be too bad.
No matter what type of loan you get, be sure to do your research into it beforehand. Not only is each loan different, but many lenders have different terms and conditions. You don’t want to put yourself in a worse financial situation by taking out a loan that you will not be able to pay back. Think carefully over which type of loan is best for you before making your decision.