It is essential that you understand the different types of loans available to you, how they are approved, and what your monthly payments will be before you make a decision on a loan. It doesn’t matter if your credit isn’t perfect. Be sure to choose a lender that is transparent in pricing and offers reasonable repayment terms so you can repay the balance in as little as five to seven (7) years ipass says.

What are the Different Types Of Loans Available to Bad Credit?

Like any other loan, the types and availability of bad credit loans will vary depending on your reason for needing it. The most common loans for poor credit are:

• Secured loans:There’s a lot of options for bad credit loans. If you need the money to buy a car, house, or to fix or improve your home then a secured loan with bad credit is the best option. Because they are backed by collateral secured loans are typically the most affordable type.
• Unsecured Loans:Many financial institutions offer unsecured personal loan for people with bad credit. This includes credit unions or alternative online lenders. This loan type doesn’t require collateral such as your car, home or other assets. It can also be repaid in a matter of two to seven months. A secured loan will cost more than an unsecured one, because you don’t need to provide collateral.
• Credit cardsThere’s a variety of credit cards for poor credit. Some credit cards offer features to help rebuild your credit. If you are unable to pay your monthly full payment, this type can be beneficial. Keep in mind that the APR for credit cards can be high. Therefore, you need to do everything possible to repay the balance promptly to avoid expensive borrowing.
• Get cash advances When you’re in urgent need of cash, there are many credit cards that offer cash advances. Sometimes, online lenders and banks offer cash advances that are short-term. Cash advances are usually more expensive that secured or unsecured personal loans and have much higher interest rates.

Payday loans carry high interest rates making them extremely risky loans. It’s easy, however, to get caught in the cycle of payday loan use. These are the reasons why it is best to avoid payday loan use and look for alternative funding.

How to Select a Loan For Bad Credit

Before you decide to get a loan for poor credit, you should think about the reasons you need it, the timeframe you have available, your ability to pay the debt off, and the amount of money you can afford. You can find more information about the following things when looking for a loan to bad credit.

• Reasons you need the loanWhen you look for a mortgage, the first thing you should think about is why the funds are needed. This is because the type you choose depends on how the money will be used. For example, a secured mortgage is appropriate if you intend to buy a car. An unsecured loan is better for those who need to fix their car but don’t want it as collateral.
• The loan repayment time After you’ve established the reason you need the funds, it’s time to determine how fast you can repay them. The lower monthly interest costs you will pay for borrowing money the faster you repay it. A credit card could be beneficial if you can afford to repair your car and pay the monthly interest charges. If however you feel it will take you several years to pay for repairs, then an unsecure personal loan for those with poor credit might be the better option.
• The amount you can affordIt is not only important to determine how fast you can repay your loan, but it is also important to think about how much you have available. This is done by setting up a monthly budget, which includes all of your earnings and expenditures. If you need help creating a budget, a counselor is the best place to go. Credit counseling agencies offer free financial education.
• When are you in need of the funds? Last, think about when you’re in need of the funds. Sometimes you can get the funds very quickly (e.g. some unsecured personal lenders offer same-day funding), but not all cases. Funding home loans can take anywhere from 45 to 60 business days. Plan ahead to ensure you get the money you need as soon as possible.

FAQ

What are Bad Credit loans?

Bad credit loans offer financing options to people with 669 credit score or less. There are many types, but the most popular one is an unsecured personal loan. Many unsecured personal loans for people with bad credit have monthly repayment terms between 2 and 7 years with a fixed-interest rate. You can also get this type of loan quickly, since many lenders offer immediate funding.

How do you determine your credit score range?

• Excellent Credit: 800 – 850
• Very good credit: 740 – 799
• Good Credit: 670-739
• Fair Credit: 580 – 669
• Poor Credit: Under 580

What Interest Rate Can I Aim for if I Have Poor Credit?

To be clear, a subprime borrower is someone whose FICO score falls below 670. Your credit is classified as “very poor” if your FICO score drops below 580.

Each lender sets its own criteria (including credit score thresholds), for loan approval and pricing. Bad credit makes it difficult to predict what APR will be offered on a personal loan. Personal loans can have interest rates ranging from about 5.5% to 36 percent. Poor credit will lead to higher interest rates.