Getting a loan of you have bad credit can be difficult, especially if you need to borrow a large amount of money. Those with bad credit present a significantly higher risk to loan providers than those with a good rating. Typically, providers offering loans for bad credit do not approve loans for more than a set amount. Often this amount is set and regulated by state law. If you do need to a take out a larger loan it will need to be backed by some form of collateral, usually a property, vehicle or some other asset.
The easiest loans to get if you have bad credit are payday loans. You can have the money relatively quickly and there is much less paperwork and hassle for you as the borrower. Unfortunately payday loan providers are only able to lend amounts up to between $500 and $1000, depending on what state you live in. There are other companies that have designed loans for bad credit but these also have a maximum of between $1500 and $2500. Another disadvantage with these kinds of loans is that because they are unsecured loans, they have shorter loan periods and higher interest rates than regular loans.
There are loan companies that offer secured loans for bad credit, but these can be very risky. Car title loans and loans that require you to put up some other form of collateral in order to qualify fall into this category. You will probably be able to borrow a decent amount of money and there will be minimal paperwork to fill out, but the interest rates will be high and often the repayment period will be short. If you cannot repay the loan within the agreed period, you could lose your asset. Also, with triple digit APRs (annual percentage rates) these loans can land you in debt if not managed correctly. It’s probably a good idea to explore all other options before going down this route. Know too that these kinds of loans are usually best for the short term.
Another option is that if your own a home and are paying a mortgage, you can refinance through the FHA (Federal Housing Administration). They offer refinancing options for those with bad credit. This is generally a safer option than other kinds of bad credit loans, but still requires some financial discipline.
Before getting a bad credit loan you really need to assess your options. Shop around for loan providers with decent rates and reasonable periods of repayment. If you can afford to, take the time to restore your credit score systematically and try not to get caught in the habit of using high interest loans.
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