How to Get a Loan with Less than Perfect Credit
Unexpected expenses are a part of life for many people, and unfortunately, there’s not always enough cash to cover them. There are several ways to get a loan, even if you have less than perfect credit. Here, you can explore some of the most popular options and make the best possible decision for your unique situation.
Credit cards are one of the most popular options for “borrowing” money, but this often comes at a price – especially if you have challenged credit. If you already have a credit card, it’s likely the least expensive option for obtaining emergency money. Keep in mind that the interest rates for cash advances are typically much higher than the interest rates for purchases, and you may be charged a transaction fee to receive cash from an ATM, too.
If you do not already have a credit card, this is likely not the best choice for obtaining funds quickly. You’ll first need to apply for a card. While the process is fast, and you can usually receive a near-instant decision, you’ll still need to wait for your card to arrive in the mail. Getting a credit card with challenged credit is difficult, and if you succeed, you’ll probably have a very low credit line – as little as £300 – and a high interest rate to go along with it. It’s a great way to build credit, but not the best choice when you need access to quick money.
Bank loans are also options for people who need access to a loan, though your credit will play a major role in your loan decision. If you have good credit, it’s relatively easy to get a personal loan for £2000 or more. However, if you have challenged credit, things become difficult. It’s still possible to get a loan from your bank if you have less-than-perfect credit, and this is especially true if you have a longstanding relationship with your bank. You may be asked to provide proof of income, which allows the bank to assess its risk in lending to you.
Keep in mind that while banks typically offer lower interest rates than non-traditional lenders and financiers, these rates are still heavily dependent on your credit score. The lower your credit, the lesser the size of the loan, and the higher your interest rates will be – even if you have a good working relationship with your bank.
A logbook loan is another option that is available to those who have less-than-perfect credit, but who need access to emergency funds. For example if you wanted logbook loans in Birmingham, a lender would provide you with money based on the value of your car, and you essentially use your car as collateral. Often, you’ll have plenty of choices when it comes to repayment. You can make monthly payments for 12, 18 or 36 months.
Like other sources of quick lending, keep in mind that logbook loans are associated with high interest rates when compared to more traditional forms of lending. If you default on your payments, the lender can take possession of your car. For this reason, make sure that you read the terms and conditions associated with the loan very carefully and only sign the agreement if you can comfortably make the payments.
Home Equity Loans
Home equity loans are fantastic sources of lending, and they often come with the lowest interest rates of all. The equity in your home is the difference between the home’s appraised value and the amount you still owe your mortgage lender. For example, if your home is worth £150,000 and you still owe £80,000 on your mortgage, you will have £70,000 in home equity.
Many people mistakenly believe that poor credit will keep them from being able to get a home equity loan, but this isn’t always the case. There are a couple of things to keep in mind if you choose this route for emergency funding. First and foremost, it isn’t a same-day or even overnight process. It can take time to process the paperwork, and this means it may not be the best choice. Your home equity loan is a separate payment from your mortgage, too, so you’ll need to make sure that you can make the payments comfortably each month.
A short-term loan (sometimes called a “payday” loan) is another option for getting a quick loan, even if you have challenged credit. Borrowers simply provide some information about themselves and their income, and they can receive a lending decision in minutes. Although it is certainly convenient and you can have money in as little as an hour, keep in mind that this is one of the most expensive options out there and should only be used in a true emergency.
The interest rates associated with short-term loans are incredibly high and are often the maximum the law allows. This means you should pay off your loan as quickly as possible to avoid accumulating debt. If you are unable to repay your loan in full – usually in two weeks to 30 days after receiving your funds – the late fees along with additional interest can quickly leave you buried in debt.
If your credit isn’t perfect, but you need access to emergency funds, there are several choices available to you. Like any other financial decision, it’s one you should think through carefully. Never borrow more than you can afford to repay, and make sure you understand the terms and conditions associated with your loan before you sign any kind of agreement.