Types of Loans for People With Bad Credit
Shady Advertising Methods
Legitimate lenders do not reach out to people blindly to tell them about their loans. Trustworthy lenders already have plenty of customers and do not need to use cold calls to remain profitable. If a lender ever calls or emails you out of nowhere to tell you about its loans, you can assume it is trying to scam you.
No Registration in Your State
Even the trustworthy lenders on our list do not offer unsecured personal loans to citizens of every U.S. state. This is because lenders must receive registration in each state to provide loans within that area.
You should always check that a lender has the necessary registrations within your state before accepting its loan. If you find any unauthorized lenders, we recommend reporting them to the Consumer Financial Protection Bureau.
Unsecured Website
When you apply for an online loan, you should make sure the website you are applying through is secure and safe before providing any personal information. One easy way to determine a website’s security is to examine its web address.
If a website has “HTTPS” at the beginning of its URL, it is probably safe. However, if the site has a flag that says, “Not Secure,” we recommend finding a different online loan provider.
No Listed Address
Whether you are applying through a credit union, bank, or general lender, you should always verify that the lender corresponds to a physical address. If a lender does not list an address on its website, it may be untrustworthy.
If you have a bad credit score, you have a few options to secure a loan aside from the https://paydayloansohio.net/cities/sidney/ online personal loans on our list. However, each loan type has its own advantages and disadvantages, and understanding it is essential to gaining the most benefits from your loan.
Secured & Unsecured Personal Loans
A secured loan requires you to put up some sort of collateral to receive your loan amount. Collateral can include any high-value asset you own or make payments on, such as your house, car, property, or fine jewelry. If you fail to make your loan payments on time, your lender can seize your collateral and sell it to repay your loan.
Secured loans are typically easier for people with poor credit to receive because they come with less risk to the lender. However, failing to repay these loan amounts can be expensive, so you should make sure you can afford your monthly payment before agreeing to a secured loan.
Meanwhile, unsecured loans do not require any collateral. As such, these loans typically have higher interest rates than secured loans. Additionally, if you have a poor credit score, you may struggle to find unsecured loans with fair terms.
Payday Loans
Payday loans are short-term loans that use your next paycheck as collateral. Typically, these loans are for the total amount of your next paycheck.
When you apply for a payday loan, you typically need to give the lender access to your checking account or write them a post-dated check that they can cash when you receive your next paycheck. In theory, payday loans allow you to receive your paycheck a few days or weeks in advance, giving you access to a small amount of cash to pay for necessary expenses.
However, payday lenders typically charge outrageous interest rates that require you to pay back double or triple your original loan amount. If you already spent the cash from the loan, you may have trouble paying back your loan plus interest, requiring you to take out another loan. Additionally, payday lenders often charge prepayment penalties if you attempt to pay off your loan early.