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It’s not uncommon to be turned down from traditional banks if you have a low credit score. Luckily, bad credit loans are available through online lenders, some banks and credit unions, payday lenders, and title lenders.
Some may suit your finances better than others, so it’s important to understand how they work before applying.Also consider the pros and cons of each option. and make an informed decision.
online lender
Some online lenders offer low credit personal loans. The application process is generally streamlined and you can get a loan decision in minutes.If approved, some lenders also offer same day or next day funding.
You can also use our online lending network to view and compare offers from multiple lenders in a single application. You can view quotes without impacting your credits, as they will typically only be soft credit pulls. Some online lenders offer pre-screening tools on their websites that do not affect your credit score.
However, online moneylenders have their drawbacks. A lower credit score may result in a higher APR because it poses a higher risk to the lender. Loan origination fees (if applicable) should also be considered as they represent 1-8% of the loan amount.
Who this is for: People who want to get a loan without going to the nearest branch.
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bank or credit union
Traditional banks are also an option for obtaining low credit personal loans. However, most lending decisions are based solely on creditworthiness and income, so it may not be the best choice. Therefore, low scores may be automatically rejected if the score does not meet the minimum threshold.
Credit unions are a little more lenient than banks. We also evaluate your credit score and income in determining if you are suitable for a loan. The advantage of working with a credit union is the relationship factor. Credit unions are member-focused, so even a low credit score can provide benefits and help you get approved.
Who this is for: Banks or credit unions are ideal for borrowers who are also account holders who want to leverage their relationship with the financial institution when seeking approval.
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Payday Render
Payday Lenders offer small, short-term loans up to $500. Even with poor credit, these loan products are easily approved, but they have significant drawbacks. You end up paying hefty interest rates, often up to 400%, and have only a short period of time to pay back what you owe.
Many borrowers fail to repay their loans by the due date, which is usually the next payday. Unfortunately, this leads to even more fees and a perpetual debt cycle that is virtually inescapable.So while convenient, these loans should only be used as a last resort.
Who this is for: Borrowers who have exhausted all other options.
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title render
Title lenders also cater to borrowers with low credit ratings. A car title loan is a relatively easy installment loan to qualify for. In most cases, your monthly payments will be evenly distributed over a set period of up to 6 months. You can also get slightly lower interest rates than payday loans.
Still, these loans use your car as collateral, so there’s a risk. Also, late payments can result in your vehicle being impounded to get back what you owe the lender.
Who this is for: A person who has the means to make timely loan payments.
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Conclusion
Bad debt loans can help you get out of your financial shackles when you can’t secure financing from traditional banks. However, it can also be more expensive depending on the loan product you choose.
Familiarize yourself with each option and the advantages and disadvantages it offers, and get quotes from at least three lenders to find the most competitive loan offer. Depending on the loan terms, it may be better to cut costs to free up funds, apply for a credit card, or borrow funds from relatives and friends.
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