With the financial crisis created by the pandemic, many people are finding themselves in need of an influx of cash to get back on their feet. If your credit score is less than perfect, it may be harder to get that loan. However, it is not impossible. You have options.
Unsecured vs. Secured Loans
All loans fall into one of two types, regardless of what the loan is for. The first type, a secured loan, is a loan that uses some type of physical property as collateral. The most common types of collateral are homes, land and vehicles. Your credit history matters, but you’re more likely to get approved for this type of loan because there is something of value securing this type of loan. Should you default on a secured loan, the lender would simply take the collateral property and sell it to recoup their loss.
The second type, the unsecured loan, is harder (but not impossible) for those of us with less than perfect credit to secure. Should you default on an unsecured loan, the lender will not have anything to repossess to repay the loan. So, if you have poor credit, the lender will be review your application carefully before extending credit.
Unsecured Loans with Poor Credit
Obviously, when you search online, you’ll find many options for different credit levels. Even if your credit is poor, lenders are still competing for your business – the terms will be different and the interest higher, but there are options. Just be careful, not every loan that you find online is as good as the ad says it is. Read the fine print. Verify that the lender actually exists. Do they have a phone number? Physical address? What are the reviews? Check with the Better Business Bureau before you sign anything.
Carefully Review the Fine Print
Remember, the lender views you as a greater risk if the loan application if for an unsecured loan, so they may be adding other details to the loan to benefit them. The biggest thing that lenders will do to protect them when lending you money if you have bad credit is to raise the interest rate, so be sure that you compare rates before you finalize the loan. And, most importantly, never get a loan that you’re not going to be able to pay back! Defaulting on a loan will make your already bad credit score get worse. If you can pay it back and are responsible with your finances going forward, then consider your options and pick the type of loan that works for you.