Loan hunting, when you have a less than perfect credit history, can be a bit daunting and discouraging. But it may be the real problem is just looking for the wrong type of loan. There are many loans for those with bad credit available, but they aren’t usually your regular “bank loan” but fall in the less traditional category and are lent out by direct lenders.
It’s possible to find a good loan, with reasonable terms that meet your needs and are affordable, even with damaged credit, but you have to go into it with your eyes open and take advantage of every tool that can help you find your best loan offer.
Different Types Of Loans For Those With Bad Credit
When you need to get through an immediate financial crunch, but the money you need is going to go toward “personal” expenditures like patching up a leaky roof, getting your transmission fixed on your car, buying a used car so your son or daughter can drive to and from college, or paying for an unexpected medical bill – the bank is not going to help you out, and especially not if you have a below average credit score.
But there are other types of loans for those with bad credit that you can get approved for and that won’t limit how you can spend the money.
Admittedly, some of those options are less than desirable. Taking out a title loan would entail using your car for collateral and risk losing your only way to get to and from work. A home equity loan could risk the equity you’ve accumulated in your home. And if you don’t have a car you own free and clear or a home you have significant equity in, those aren’t real options anyway.
When To Use A Payday Loan
Payday loans allow you to borrow very small amounts of cash, usually $100 to, at most, $1,000, right when you need it most. You get the cash same or next business day and have 2 to 4 weeks to pay it back in one lump sum payment.
Interest and fees can be high on payday loans in proportion to the loan principal, but since that principal is small, the total dollar amount of interest may not be that much. It all depends on the lender and on whether you pay the loan off on time.
Payday loans are best for extremely short term emergencies when you are short so many hundreds of dollars but are sure you can get the funds to repay in a matter of weeks. It’s a stop gate measure, which can sometimes save you money be helping you avoid late fees and overdraft fees or having your car repossessed, and the like.
When To Use a Personal Loan
Personal loans are taken out in amounts between $1,000 and $5,000 in most cases, and the loan term runs from 3 months to 5 years. There is no collateral needed. You just have to prove you have a regular income sufficient to make the payments.
With personal loans, you pay regular monthly installments, which the lender should formulate based on your income to ensure affordability. When you have a larger, longer term expense that a payday loan won’t work on, but you can’t get a bank loan for it either, a personal installment loan is often the best option.
If you need help finding the best loans for those with bad credit, be it a personal loan or payday loan, don’t go it alone. Bonsai Finance’s speedy, powerful search engines can locate the right loan fast!
Here are some other articles you may find helpful:
10 Tips on How to Use a Credit Card to Your Advantage
Your Guide to Bad Credit Installment Loans
Is a Personal Loan Right for You? 10 Essential Financial Tips for Millennials
Everything You Need to Know About alternatives to No Credit Check Business Loans