Credit history plays a vital role when a lender is considering a borrower’s application. An individual who has defaulted on a loan in the past or was late for a bill payment may not qualify to borrow various types of loans.
Keeping a stellar credit history is not easy, and a good number of people find themselves ineligible for borrowing. Sometimes, you can get a personal loan with bad credit but end up with unfavourable terms. Over the years, banks and other financial institutions have become more flexible, offering products that are ideal for persons with and credit. Know how to apply for a loan with less than perfect credit and which product is more suitable.
Understanding Bad Credit
Poor credit is mostly relative when it comes to borrowing. One lender may need a credit rating of 650 while another one may not consider it suitable for a personal loan. Various elements contribute to your credit score, including electoral roll, repossessions and overdrafts. Lenders consider credit as bad if it poses a higher risk to them. Most lenders look at credit history on a case to case basis.
Types of Bad Credit Loans
Borrowers have more than one option when it comes to finding a loan with a poor credit history. Credit unions and online lending services are some of the areas that potential borrowers should turn to when looking for no credit check loans.
A payday line of credit is ideal for a person with a consistent salary. The borrower doesn’t consider your credit history; rather your ability to repay the loan. All the lender asks for is proof of income, which can be a bank statement or payslips. This loan is a short-term solution and is suitable for emergencies like paying a crappy repair or overdue bill.
These kinds of no credit check loans use the equity on a car to advance money to a borrower. You must own the vehicle outright to use it as collateral. The lender will assess the worth of the car and then give out a loan based on that figure. Lenders usually give loans that are equivalent to a percentage of the vehicle’s total value.
You can apply for bad credit loans with a guarantor. A family member or friend can co-sign a loan with you. This individual must have good credit, and some lenders may ask for collateral. Guarantor loans offer long payment periods and are, therefore, suitable when looking to get a large sum.
Having a checkered credit history does not mean that you cannot get a personal loan when the need arises. Lending businesses have a host of products that don’t necessitate credit checks. Bad credit loans are not all the same, so know what works for you before you apply for a loan.