Getting a loan is not easy especially when your credit score is not that much appealing. The first thing that most banks and credit unions check is the credit history of the borrower. So, you see! This is simple math- the higher is your credit score the better will be your chances of getting the approval. However, there are other factors such as the borrower’s income status, age, any value as collateral that the lenders take into consideration.
Well, if your credit profile is not that good, then it doesn’t mean that there is absolutely no scope to get new credit. There are many lenders in the market who can provide you with no credit check loans provided that you have a good background in other requirements. Here, in this blog, we have mentioned some of the best lending options available for the borrowers with bad credit. So, let us get started.
Types of loans that are perfect for bad credit borrowers
- Payday loan
This is one of the most popular forms of short loans that are applied by plenty of people all around the world. Basically, in a payday loan, the lender gives you a fixed amount of money easily that you will be required to pay back the day you get your salary next month.
One good thing about cash advance loans is that you don’t need any kind of guarantor in order to get approval. As this is a short term loan, the amount given is quite low as compared to a long term loan. However, there is one thing that you also need to keep in mind that as loans are given quickly with no guarantor factor, the rate of interest is quite high.
- Guarantor loan
If you want to get a loan with bad credit and that too in a decent interest rate, then guarantor loan is just the right choice for you. In this, you have to provide a guarantor to the lender which helps them in trusting you. Well, the lenders are not there for any social work but to make money. Thus, if you somehow couldn’t pay up the loan, then it will be your guarantor who will have to pay the debt to the lender on your behalf. Well, you being the bad credit borrower is not a problem, but make sure that the credit profile of the guarantor is strong.
- Bad credit loan
Well, this loan is quite similar to payday loans but the only difference here for borrowers is that they have the liberty of paying back the loan up to a full year. Well, this loan is perfect for the people who already have enough on their plate and who cannot pay larger instalment. However, as the duration of the repayment is extended, you will have to pay a higher amount of interest at the end. In such loans, the lender can approve your application even without a guarantor but you will be charged a slightly higher rate of interest.
- Logbook Loan
It is a type of loan where the borrowers have to provide their vehicle as collateral. It is quite popular in the UK and the borrowers can get even a large sum of money and that too within hours. Basically, in logbook loan, the person can borrow maximum up to 75% of the total cost of the vehicle that they have given as security. And until you pay the loan completely back, the lending company will own the car. Well, this loan is quite expensive and it also put the borrower at risk of losing their vehicle. Thus, if you are also thinking to apply, then make sure that you are ready to take the risk.
- Pawnbroker loan
As the name says, in this loan a borrower has to give his/her any valuable stuff such as jewellery, expensive watches, gadgets, or any white goods as security. After the borrower has placed his/her asset as security, the lender then evaluates the price of the asset and then makes the offer. And after the borrower completes the repayment, his/her belonging that was kept by the lender as security is given back. The borrower can choose the duration of repayment between 3 months to 6 months according to their circumstances.
- Peer to peer loan
This is the newest type of loan in the market where the borrower is matched with the suitable lender. This form of lending is basically done via the online process where the borrower can get a lower rate of interest depending on the negotiations done with the lender. However, for the bad credit people, these lenders may charge a higher rate of interest.
Wrapping up, these were some of the best options available for the bad credit borrowers and they can choose what suits them the most. Well, you have to consider the fact as your credit history is not that good so you might not be offered the same rate of interest as the people with good credit score.
