People, who have bad credit, often face a lot difficulty in getting a loan. However, there are many kinds of loans, which are available to people who do not have an impressive credit score. Few of them include:
Line of credit on home equity
For people who own a home with equity stake of minimum 20% in it can get a good line of credit on home equity. This implies that the house is used as collateral. This method of getting credit is often used by people who have a bad credit score. Tax deductions may also be claimed on this line of credit. Few features of this type of line of credit include:
- Borrowers can use their funds in a flexible manner.
- The rate of interest on this kind of loan is lower.
- The closing costs are borne by the borrower.
- Fees may be charged if the credit is not used immediately after being granted.
Bad credit loans
Bad credit loans are granted to people who have poor credit scores. Amongst the different types of loans you can get with bad credit, this one is the most popular and also easily preapproved. The interest rates on these loans are extremely high. Few other features of these loans include:
- People with bad credit qualify for such loans.
- Limits are imposed on the amount a borrower can borrow.
Credit union loans
People who have bad credit may approach credit unions for getting a loan approved. The standards of credit unions are much relaxed when compared to banks. Being non – profit entities, the credit unions offer loans at a lower rate of interest. Few features of credit union loans include:
- People who have bad credit can get unsecured loans which are generally offered for a short period of time.
- Penalties and fees are fewer when compared with banks.
Borrowing from individual lenders
Peer – to – peer credit can be obtained from various websites which allow borrowers to borrow from various individual lenders. Few features of these loans include:
- These loans are easily approved
- Interest rates may be high and the process of receiving funds from the lender may take time.
People with bad credit may get loans at lower interest rates with the help of a cosigner. However, getting cosigners is not easy as not many people agree to take a risk on behalf of somebody.
Secured loans may be granted to people who have bad credit but give collateral. In these loans, interest rates are lower and repayment period longer.
There are numerous ways in which people who have bad credit can get loans. Some people also prefer to borrow from their friends and family members at lower interest rates and flexible repayment terms.