When you have a bad or low credit score for loans, the banks and traditional financial institutions will not entertain your loan applications. You would have to look for alternative loans.
Types Of Low Credit Score Loans
Low credit score loans have their fair share of disadvantages, such as very high rates of interest, but they are almost always the only option you have.
Low credit score loans are of various types and they don’t always have the same requirements. Thus, you need to know your credit score, assess your requirements and what the loan application calls for before you decide to go ahead with a particular type of loan.
Representative 277.5% APR - Representative Example: Amount of credit: £750 for 12 months at £119.21 per month. Total repayment of £1430.52. Interest: £680.52. Interest rate: 140% pa (fixed). 277.5% APR Representative.
Here are five types of low credit score loans that you may consider.
Line of Credit Using your Home Equity
If you own a home, then you can cash in on its equity or present value. Your home’s resale value will be assessed and accordingly a line of credit would be opened up for you. If you don’t own a home, then this will not be applicable for you.
This type of low credit score loans is very helpful because the interest rates are not extremely high. Also, you may have a very low credit score and yet you would get this credit as your home would be used as collateral. This is a type of secured loan.
Credit unions are like banks but only for the members of the association. Also, credit unions are much more lenient and are willing to help the members of the community in hard times. Credit union loans are unsecured and often you would get very low interest rates.
Peer to Peer Lending
There are many companies that facilitate peer to peer lending. It is similar to facilitating the meeting of a lender and a borrower. You may get your loan from one or many peers. Such kind of low credit score loans is easily gettable but they may not always satiate your entire need.
For instance, if you are looking for five thousand, then it may so happen that you would end up with three or four grand. But the rate of interest is very low which works to your advantage.
Personal Loan from Friends or Family
If you have some friends or family members who are in a position to grant you a loan then this is the best way forward. With little to no interest and lenient repayment terms, personal borrowing from people you know is one of the best low credit score loans.
You may also want to check out payday loans or you may look for a cosigner, who is someone with a better credit score to get a traditional loan.
Have a look at our different loans.