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Applying for a Unsecured Loans For Bad Credit can seem impossible, but it can be done, as long as you make sure and have calculated plan to make on-time monthly payments.
Poor credit is that status no one wants to be in. But sometimes it happens to the best of us. No need to shame of about it. It can be due to pure financial mismanagement, but it can just as easily be the result of the difficulties of life. A divorce, the onset of a serious illness, or career crisis can turn good credit into bad credit in short order.
But there may still be loan options available to you if you have bad credit. They won’t be under the best of terms, but they can be a godsend when absolutely necessary.
Peer-to-peer (P2P) lenders
These may be the best sources for financing when you have poor credit. You’ll pay high interest rates – maybe as high as 36%. But they do offer fixed rate, limited-term loans that don’t require collateral.
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Perhaps best of all, loans can be taken for just about any purpose. You can use them for debt consolidation, starting a business, or even purchasing a car. Here are two popular P2P lenders to check out.
- Payoff (as the name suggests) is designed to help you pay off high-interest debt and boost your credit score by up to 40+ points. The application process takes as little as three minutes, and you can check your rate without hurting your credit score. Plus, you’ll have access to your funds quickly, so you can start paying off your debt ASAP.
- Prosper focuses on personal loans. Their application takes just a few minutes, and you can get approved for loans up to $40,000. Prosper offers a number of term lengths ranging from three to five years, so you can pick the one that fits your budget. Plus, all your payments are at a fixed interest rate, so you don’t have to worry about your payment terms suddenly changing.
Other types of unsecured loans for bad credit
Banks and credit unions
These institutions are strongly credit score driven. If your credit score is below 580, most will not make a loan to you. Credit unions are the better of the two, particularly if you have money on deposit with them. They may make a loan if you add a cosigner, but it will depend on the credit union. Most have credit score cutoffs, and will not lend below that level.
Payday loans
These are predatory loans, designed specifically for people with bad credit. That’s why they’re best avoided. Basically, they provide a loan advance against your next paycheck. The interest rate can exceed 300%, and they will require access to your bank account to withdraw funds when your next paycheck comes in. If you fail to get paid, and pay off the payday loan, things can get seriously ugly.
The worst thing about payday loans is that when you take one you’re practically doomed to take another – and another…Most people who use payday loans get trapped on a cycle that doesn’t end until they default. And payday loan companies can be particularly nasty adversaries when that happens.
Subprime loans
These are mostly a consideration with auto loans. If you don’t qualify for bank or credit union loans, car dealers will put you with one of these lenders. It may be necessary if you absolutely need a car, and there’s no other lending choice. But the cost is steep. Subprime auto loans are famous for ridiculously high interest rates (20% or more), and extended loan terms (up to 84 months). They’re a major reason why people with poor credit are more likely to end up owing more on their cars than they’re worth.
Credit cards for people with bad credit
There are a few basic credit card choices for those with poor credit. You can get unsecured credit cards that have more lenient credit requirements (they usually don’t offer rewards), credit cards specifically for people with bad credit, and secured credit cards.
Any of these options will come with limited benefits. Those can include low credit limits, high interest rates, and high fees. They typically lack the usual credit card benefits, such as airline miles, cash back rewards, or collision damage waiver coverage for rental cars.
However, they will give you a credit card, which is absolutely necessary in certain situations, like purchasing airline tickets or booking car rentals. And just as important, they’ll report your good credit history to the three major credit bureaus, giving you a real chance to improve your credit scores.
