Bad credit can be one of the most limiting factors when it comes to getting loans. Lenders don't tend to look kindly upon borrowers who don't present great credit, because they represent a higher risk for the company. Bad credit is a result of a spotty, or otherwise irresponsible financial history. It can be an indication of failure to repay previous loans, or a tendency to make late payments. But there are ways for you to borrow money even if you struggle with a poor credit rating.
Why Is Credit Score Important?
Credit score is something most lenders, cellphone providers, and even landlords will check, because it's a fairly accurate representation of what you are like as a borrower and how well you manage your finances. No one wants to be stuck waiting for money back from a person who has a history of defaulted loans. That's why it's essential that you maintain a good score and do your best to improve it. Equifax can teach you more about credit. But if it's already bad, you still need some options for loans.
1. Loans With Bad Credit
Perhaps the easiest way to borrow money with bad credit is with a loan that is especially conceived to help borrowers with a difficult credit history. It's entirely possible to get special loans for bad credit, with the obvious advantage of offering money to a set of borrowers that may otherwise be outright rejected because of their rating.
However, you need to look out for the fact that a loan with bad credit will come with certain limitations, such as a lower borrowing amount, a higher interest rate, as well as a shorter repayment term.
2. Loans With No Credit Check
And if you'd rather ignore your credit score entirely, you can actually do that, too! Most loan providers will require a credit check, but there are also lenders who make a living out of offering loans that don't rely on a credit check. This is meant for people who are uncomfortable with putting their score on the line.
Keep in mind that other checks will be performed, including affordability checks, ID checks, employment checks, etc. You will also pay a higher interest rate, just like in the case of bad credit loans.
3. Family Loan
This option is so simple and obvious, you'll wonder why in the world you've never thought about it - if you struggle with bad credit, why go around asking for money from banks and lenders, when you can get a loan from a family member? Of course, this is contingent on you having a loved one who can afford - and is willing - to give you the money.
The advantages are obvious: you get a loan with no credit check, and possibly no interest charge. The disadvantage, however, is that mixing business with family can be tricky and even end up negatively impacting your relationship, so you need to be careful.
4. Peer To Peer Loan
If traditional lending isn't for you, then perhaps you're interested in something a bit outside the box. Peer to peer loans, like the name suggests, are loans you get from your peers, as opposed to a bank or traditional lender. The process is simple and all transactions are hosted on a platform meant to bring lenders and borrowers together. If you're lucky, you may just find a lender who is willing to offer you money with no credit check.
5. Same Day Loan
Because of the nature of this borrowing option, same day loans typically are offered with no credit check. They're quick loans in cash, usually meant to cover financial emergencies. That means that this isn't the time and place for a credit check, but it also means the loan amount is quite small, and the interest rate is higher than other places.
In conclusion, getting loans with bad credit is certainly possible, but these options come at a price. If you have no other choice, they can be a life-saver. Otherwise, make sure to save money, instead. The Money Advice Service can offer you valuable information on budgeting and saving.