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In our lives, there will be a point where we need extra money to resolve the financial problem- may it be due to some unforeseen situation like car and home repairs or an emergency such as hospitalization and medical expenses. In cases like these, a quick resolution is to take out a loan.
However, some borrowers forget the basic principle in borrowing money, and that requires due diligence in paying it on time. You can always take out a loan, but for you to better enjoy the benefits, you must have a good credits score. Otherwise, you’ll be burdened with higher interest rates and stricter payment terms.
Yet, having a bad credit doesn’t instantly mean that you’ll not be eligible to apply for another loan. There are loan alternatives that can help you with your finances, even with a bad credit score.
Bad Credit Score Problems
There’s a lot of compromises when a borrower does have a bad credit score, not to mention, it’s a struggle for them to be qualified for a loan they specifically want. Borrowers who do have bad credit scores frequently figure out how to get a loan, especially when there’s a need for cash. For some lenders, bad credit score borrowers pose a high risk, which is why some of them deny their loan application.
Furthermore, having a bad credit score requires borrowers to have a higher interest rate compared to those with good to excellent credit scores. And bad credit score borrowers are placed in a tight spot when it comes to setting for payment terms. With these limitations, bad credit borrowers are having a difficult time, especially when they are eager to improve their scores.
But don’t fret, there are loan alternatives that suit best for borrowers with bad credit. These alternatives can be the gateway to improve the credit score and a chance to be granted with money.
Best Loan Alternatives To Can Choose From
Here are the best loan alternatives that work best for bad credit scores. Check each one of them and see which of them suits you.
Credit Union Alternative Loans
Credit union alternative loans are ideally best for borrowers who are members of a local credit union. This not-for-profit organization is leaner to help and assist their members who are struggling with their finances. They also offer more lenient payment terms and interest rates are not set as high as other lending institutions.
This can be your best shot in taking out a loan, so if you’re interested and currently a member of a local credit union, give them a call and ask about the loan application process.
Guarantor Loans
From the name itself, guarantor loans require you to have someone to co-sign your loan. The guarantor loan will stand on your stead and act as your loan trustee. And to be approved with a guarantor loan, your guarantor should have an excellent or good credit score.
Guarantor loans work efficiently if you have a friend or a family member that you can talk things out regarding money problems. Once you default on the repayment, your guarantor is pressured to pay your balance, and this sometimes leads to personal issues and conflict. Make sure that you make an arrangement with your guarantor and pay your dues on time to avoid such problems.
Home Equity Loans
Home equity loans work as a personal loan. However, it comes with a twist. When applying for a home equity loan, your property will be your collateral and the lender has all the right to seize your property when you miss repaying your loan.
Since it’s a kind of secured loan, lower interest rate and better payment terms are offered by your lender. This type of loan is a bit risky, but if you intend to get one, make sure to remember that it’s your home that’s on the line so make sure to make all your payments on time.
Payday Loans
Payday loans are everywhere, and they offer quick cash loans whenever you need them. Not to mention, they require no credit check. But payday loans come with a caveat as they have the highest APR rate among other types of loans. What’s good with payday loans is its unsecured loan, so there’s no need for collateral.
Also, payday loans are best if you need quick cash for emergency purposes. Just make sure to pay it fully and manage your expenses efficiently so you won’t be trapped in a debt cycle.
Paycheck Advance
If your employer allows paycheck advances, there’s no need for you to take out a payday loan for one. It’s your hard-earned money which you need earlier than the scheduled payday. The good thing with paycheck advances is there’s no risk attached and no interest rate. However, the money you will receive entirely depends on your paycheck, if you need more, then you need to look for the other alternatives mentioned.
Takeaway
Having a bad credit score is a struggle, especially if you’re in dire need of money. There are many lender’s restrictions and limitations that make it difficult for the borrowers to apply. Yet, there’s still a lot of loan alternatives out there that can be of great help for these types of borrowers. They offer flexible terms and acceptable interest rates which can be a good start in rebuilding credit score. Borrowers need to exhaust all possible alternatives and check if one will fit their preference and needs.
