Few financial situations are harder to bounce back from than a damaged credit score. If you need to secure a line of credit with a poor borrowing history, you may have options you haven’t considered. Here’s a brief guide to some excellent offerings of loans for people with bad credit borrowers.
Before you consider a source of credit as dubious as payday lending, consider the possibility of securing the money you need by offering up some of your less-liquid assets as collateral. Major assets like a home or a vehicle represent a potential source of credit and can secure you much more favorable interest rates than borrowing from lenders who specialize in taking on risky borrowers.
Of course, using your home or automotive equity to secure a loan carries a significant risk. You must be absolutely scrupulous about meeting your payment obligations in order to hang onto your assets. Thus this method of securing credit should only be contemplated when you have absolute confidence in your ability to pay.
Many traditional lenders will offer much more advantageous terms on their loans if you borrow money with a partner whose credit history is better than yours. The overall cost of such borrowing generally falls in between bad credit loans and conventional ones. Co-signed loans for people with bad credit borrowers function by “pooling” your credit with that of a person who has been more fiscally responsible in the past.
The challenge in securing this kind of credit is in finding a cosigner who has more faith in your ability to repay your loan than most lenders would. A cosigner accepts responsibility for your debt if you default on your loan, exposing them to considerable risk. This means you need an extremely trusting friend to agree to helping you take a co-signed loan.
Peer To Peer Lending
One of the latest innovations in the world of personal finance is direct peer-to-peer lending. This form of financing has been available since 2005. P2P lending is powered by online technology that matches individual borrowers to lenders. Thanks to the relatively minimal overhead involved in this type of loan, interest rates can be surprisingly low. While most P2P lending sites advertise interest rates as low as six percent, you can realistically expect to pay higher fees if you have a poor credit history. P2P lending can still give you access to much more favorable terms than payday lenders, though.
On a P2P lending site, you’ll submit your basic financial details along with your reason for seeking a loan. This will be reviewed by potential lenders in hopes of finding a match. P2P lending services do check your credit and make your scores available to lenders, but your odds of securing credit usually remain higher than when working with traditional banks.
Bad credit can be a cyclical problem where poor financial decisions in your past force you to continue making more bad decisions. Getting yourself a little credit is often vital to breaking out of this cycle and pulling yourself back to financial stability. Although securing a loan with a bad history is a challenge, it is by no means impossible. Remember to survey all your options and consider the lending possibilities outlined above.