If you have bad credit, you already know how difficult it can be to get a personal loan. Conventional methods of obtaining unsecured loans for bad credit are almost non-existent for you which means you could really be in a pickle should an emergency arise.
Unfortunately, it seems when you are in this position emergencies always occur, car trouble, unexpected illnesses and home repairs tend to crop up out of nowhere when you are broke and have bad credit! There are a few options still available to you; however, you should know the pros and cons of these personal loan options before you apply.
Collateral and Bank Loans
Your bank is the best place to seek out a personal loan for obvious reasons. If you have established an account with a financial institution and kept it in good standing for a year or so, you could obtain a small personal loan even with bad credit.
However, you are going to need some collateral for a secured loan. The best collateral you could have is either equity in your home or a later model vehicle that you own outright.
- Pros- when you work with a local bank response time on your loan will be quicker and the interest rates you are required to pay will be lower. They are often more understanding if you should need to make a delayed payment or consolidate your loans.
- Cons- If you use your home or car as collateral you may need to increase your insurance coverage. All states require liability auto insurance, however if you have a lien against the property full coverage will likely be required, which will add to your monthly budget. Of course, there is always the risk, should you default, that the bank will seize your vehicle or foreclose on your home so be careful.
Cash Advance Payday Loans
In many places around the country, you can get what is known as a payday advance loan. These are brick and mortar businesses where you can go, leave a check or sign an agreement that you will pay back the money you have borrowed with interest by a specific date. It should be noted that states across the country are beginning to create laws against these practices.
- Pros- Instant access to money, most of the time you can get your money the same day you apply. If you have a pressing bill to pay or emergency on your hands this can be major plus.
- Cons- Payday loans are severely limited in amount. Each business will have different criteria but it is generally a specific percentage of your take home pay. This could definitely be a problem if you are facing expensive automotive repair or a big hospital bill. The other downside to these types of bad credit loans is the high interest. Low interest loans for bad credit are virtually non-existent. You will pay through the nose for this type of loan and only have a short amount of time to pay it back.
Online Hard Money Lenders
The final place you can look for a personal loan despite bad credit is the internet. Online loans are provided by companies cropping up everyday offering to advance you as much as $1,500 until pay day.
These are very similar to the average payday loan lenders you can find locally, however even if you live in a state where they have been banned you could get a loan through an online company. The pros and cons are pretty much the same as brick and mortar payday advances with a couple of additions.
- Pros- you may have access to poor credit loans regardless of where you live.
- Cons- There is generally a lot more paperwork to do, you may be required to fax in copies of identify material such as your driver’s license and banking information which leaves you vulnerable to identity thieves.
Conclusion
When you need money fast but have bad credit, it can be a real nightmare. Thankfully, there are still a few options available that can get you through the rough times. One thing for certain is you can expect steep interest rates from any bad credit loans.
Before you apply for any type of bad credit personal loan, you should examine all the fine print as well as the pros and the cons. You do not want to make a bad situation worse by committing to payments you cannot afford. There may be times when your best interest would be served by selling something you own outright rather than risking further financial difficulties.
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