How to Get Bad Credit Loans
If you are one of many Australians trying to obtain a loan with bad credit, don’t get discouraged because you have several options. The fact is nearly one in five people living in the country have bad marks on their credit, thus limiting their ability to borrow funds. In the past there were fewer options for such people, but as times have progressed you will find websites and other lending institutions that are willing to provide several options. The following information will outline what you should know before starting your search and the loan types you’ll come across when determining how to get a loan with bad credit.
What to know before getting started
Before getting started it’s a good idea to know exactly what a bad credit loan is. A bad credit loan is a secured or unsecured loan given to a borrower who has less-than-perfect credit. What this means is that either the borrower has large amounts of outstanding debt, they have failed to keep up on loan payments in the past, or simply have not established a credit history yet.
At the same time, knowing exactly what kind of loan to look for is equally as important. For example, some look for loans that will consolidate existing debt into one monthly bill, while others wish to obtain personal loans that will instantly put cash in their pockets. Once you determine the kind of bad credit loan you need, it’s time to begin your search. Below you’ll find a description of the popular types of bad credit loans including personal unsecured, debt consolidation, home equity, payday loans and cash advances.
Types of Bad Credit Loans
There are several types of bad credit loans available. The majority of these loans are readily available online through different websites, but there are some lending institutions that offer them as well. Here is a comprehensive look at the ways you can get a loan with bad credit:
Personal Unsecured Bad Credit Loan
Unsecured personal loans are collateral-free and great for those times you need small amounts of cash to get you through tough financial times. Though companies offering such loans do not worry about your past credit history, beware as these loans usually feature the highest interest rates, are subject to larger set-up fees, and offer shorter terms such as 30 days. Unsecured personal loans are available in amounts as low as $500 and as much as $5,000. The approval process is usually quick, as these lenders do not conduct credit checks and most applications are completed online. The best benefits of unsecured personal loans are the lenders offer quick access to funds and repayment schedules that are flexible.
Payday Loans / Cash Advance
If you are employed with bad credit and in need of a short term solution, payday loans or cash advances can be a good option. Repayment plans are shorter, but such loans are designed to help you make it until you receive your next paycheck. These loans usually start as low as $500 and go up to as much as $2,000. The one thing to keep in mind when borrowing a cash advance or payday loan is you will be expected to pay a 20% establishment fee and monthly fees of up to 4% the loan’s total principal. What this means is when you borrow $500, the total amount repaid will be over $800. Hence, dealing with payday loans or cash advances can become dangerous unless you can afford to repay the total amount on the next paycheck.
Debt Consolidation Loans
Lenders dealing in debt consolidation loans are focused on helping those who have a substantial amount of debt become free of it. Debt consolidators work as a middleman between lender and borrower. In such cases the borrower has generally fallen behind payment schedule, has a high debt to credit ratio, or simply wants to consolidate their debt from many monthly payments into a single payment. Just be careful that you are not heading down the wrong road with this type of loan. Some people find this a permanent fix because they end up paying less in interest and other fees. However others find that debt consolidation wasn’t their best option when they realize they can’t afford the single monthly payment.
Home Equity Loans
Though many homeowners were affected by the housing bubble, for those who own their own home and have equity in the property a home equity loan is an excellent idea. You need to know that if you fail to repay this debt it does put your property at risk. However, at the same time, using your home to secure an equity loan can quickly get you a loan that is low interest and tax-deductible. Just keep in mind that lenders require you have about 20% equity invested in your home already. If this is your case these loans are great because there are usually no fixed terms, no monthly fees, and they offer up to 80% of loan-to-value.
One Final Option
If you have looked over the choices above and don’t feel any of them meet your needs, your best option may be to find a co-signer. If you have a close enough friend or family member willing to help you, getting a loan can be much less stressful. This is especially helpful if you are looking to buy a new home or car. The bottom line is that when you have a co-signer it guarantees the lender that if you are unable to make the payments the co-signer will cover it. Hence, it doubles the lender’s chances of the loan reaching full repayment. The most important thing to remember is your co-signer must have good credit because lenders will most likely not establish a new loan for two people with bad credit. Though finding a willing co-signer can be easier said than done, it’s by far the best option for someone with bad credit because it shows on both people’s credit reports. In other words, the person going into the loan with bad credit can end up coming out with a slightly higher credit score if all payments are made on time.
In today’s economy there are many people who find their cash falls short each month. Roughly one in five Australians have bad marks on their credit that sometimes prevent them from getting loans from banks or other large financial institutions. Nonetheless, if you can relate to this, there are bad credit loan options available for you. The best place to start is on the Internet by doing a bit of research to determine the types of loans you qualify for and exactly what lending institutions are located close that can help.
Regardless if you are looking for a home equity loan or a debt consolidation loan, there are many lenders more than happy to help someone with bad credit. They usually have some guidelines you need to meet but tend to help as long as you have verifiable income via a part or full-time job. In the end, while some people think it’s impossible to obtain a loan with bad credit, this simply isn’t the case. Using the types of loans discussed above, along with the right lender you could have cash in your pocket as early as the same evening.