Bad credit can make life difficult, especially if you need to start up a new business or invest in a personal project; the good news is loans are still available to those with poor credit, and there are several types to suit different situations. Read on for more information on poor credit loans.
Secured Loan
Someone with bad credit can still find a loan if they have some assets. Assets that lenders normally view as suitable collateral include properties, vehicles, equities, investments, and more. A secured loan offsets the risk by using the assets and lends hard cash out hard cash.
Someone might require a secured loan for a new business, vehicle, or qualification. Bad credit means they can’t be signed off on a conventional loan, so they have to risk a valuable asset they already have. In the event borrowers cannot return the money, the asset is repossessed.
Guarantor Loan
If someone has extremely poor credit, the chances of obtaining a loan are slim; still, someone in this position might require a loan for a new business, personal reasons, or a new opportunity. If the person is trustworthy and has a guarantor, they might qualify for this type of loan.
A guarantor is a responsible person with the resources to repay the loan amount if the borrower cannot repay the sum. A guarantor is usually a friend or family member with a close relationship with the borrowers. Be warned; a guarantor loan comes with a much higher rate of interest.
Hard Money Loans
A hard money loan is similar to a secured loan in many ways, a hard money lender provides cash to borrowers in exchange for interest, but the borrower can only qualify for this type of loan if they have an asset such as property to secure the money against without a good credit score.
One of the main differences between a hard money loan and a secured loan is the money usage, hard money loans are normally secured against property and used for fix and flip investment opportunities. Hard money loans are often easy to access and fast to approve.
Personal Loans
Options are limited for those with poor credit ratings, but personal loans might still be available; it all depends on how successful you are at convincing the lender you are a trustworthy borrower. Mostly, this comes down to the numbers and your track record of repaying your debt.
If you are successful at obtaining a personal loan, you can expect to pay a much high APR and borrow a much lower amount than you would if you had a guarantor or some collateral. In the long run, this type of loan can be quite expensive, so ensure you have a disciplined approach.
Final Thoughts
Poor credit doesn’t mean you can’t get a loan; it simply makes it harder and more expensive. If you need a loan for a new business, project, or personal reasons, you can normally get one by using the strategies outlined in the article. Either way, you need a disciplined approach to debt.
