Getting approved for a loan is usually a challenge, especially if you don’t have a consistent source of income or you have bad credit.
Although there are several other ways to get loans for bad credit, these loans may have unfair terms like high-interest rates and fees. Some of these lenders take advantage of people with bad credit and lead them into more debt. Hence, it is good to conduct thorough research, consider a loan’s terms carefully, and ensure it’s the best for you. Keep reading to discover the easiest loans you can get approved for, even if you have bad credit.
Table of Contents
What is Bad Credit?
Before you apply for a loan, you must understand what bad credit means and if you have it. According to Investopedia, you have bad credit if your credit score is between 300 and 579. Most lenders also define bad credit based on the factors below:
- Credit history duration
- Payment history
- Amount owed
- Number of new credit account
- Maxed-out credit cards
If your credit score falls within the bad credit, you should try as much as possible to improve your credit score to get more loan options. However, below are some easy loans you can consider.
Car Title Loans
A car title loan is a secured personal loan, where the lender simply obtains a lien on your car until you pay it back. It is a short-term loan that you can get easily, even with bad credit. When you apply for a car title loan, you must be ready to repay within a month or less. The amount of the loan you’re applying for must also be less than the value of your vehicle.
Car loans can be risky; hence before you consider them, ensure you have a sure means of paying back; otherwise, you may risk losing your vehicle to the lender if you’re unable to pay.
Payday loans are short-term, high-interest loans and are usually used by people who need money fast but don’t have enough savings to cover the cost of a larger loan. Although they don’t give loans above $500, they are easy to get with no collateral or credit check.
Payday loans can be a lifesaver if you’ve spent all your savings on an unexpected bill or emergency expense and need cash immediately. When you apply for a payday loan, you are expected to pay back the loan plus interest in a few weeks or on your next paycheck. Although the interest rate on payday can be high, they can help manage your finances until your next paycheck comes along.
Peer-to-peer lending, also regarded as P2P, is a type of online lending where lenders and borrowers connect directly. Although the requirements vary for different lenders, most times, lenders request low interest and don’t consider credit scores.
The key difference between peer-to-peer lending and traditional banking is that there are no intermediaries involved. The two parties involved in a transaction directly interact without any third party being present. This saves time and money on both ends since no middleman takes a cut of every transaction.
Personal loans are loans borrowed from banks, online lenders, or credit unions. This type of loan can be paid within a set period or in installments. Personal loans can both be secured and unsecured. While secured loans require collateral, unsecured loans don’t. However, unsecured loans are majorly available to people with good credit scores. If you have bad credit, you can apply for a secured personal loan; however, it comes with high-interest rates. Unlike payday loans, you can get large amounts and pay them back over about 84 months.
Pawn Shop Loans
Like car title loans, pawn shop loans are secured loans that take collateral before they lend you a loan. However, you don’t have to use your car as collateral; they accept any valuable item and will only lend you within 25% to 60% of the value of your item when sold.
On average, a pawnbroker can give you a loan of $150, and you’re expected to pay it back within 60 days. In a case where you’re unable to repay, the pawnbroker has legal rights to sell your item.
In conclusion, even though you can easily apply for the above loans, even with bad credit, they are not 100% risk-free. Hence, ensure you take the time to weigh your options before applying for a loan.