If you have bad credit, you may already know that it can make things difficult, especially if you are seeking a long term loan. Borrowing is not as easy as it is with good credit, and you may be anxious about credit checks. But is bad credit really that damaging? Are you limited to bad credit loans or loans with no credit check that have exorbitant interest rates, or can you still get a long term loan? Keep reading to find out!
What Does It Mean To Have Bad Credit?
A lot of people are intimidated - or even a little scared - of the idea of bad credit. What does it mean? And can it really ruin your life? Like all things, it's not quite as dire as people make it seem. While yes, a poor credit rating affects you financially and is not desirable, it's not the end of the world, either.
Bad credit will limit you because not all financing types - and the best deals - will be available to you. The reason for that is that you represent a high-risk customer for the lender. You see, bad credit is a result of irresponsible financial behavior: defaulted loans, late payments, skipped payments, rejected loan applications, etc. Since you have a somewhat checkered financial past, it's understandable that you are not the most trustworthy borrower and lenders may be wary of lending to you. However, there are still options you can pursue and ways to work around this.
What Kind Of Short Term Loans Can You Get With Bad Credit?
Bad credit loans
The most obvious option is to get a bad credit loan. Meant for individuals who struggle with poor credit, bad credit loans aim to offer options to those for whom the market is limited. They approve a wide range of people, but there are caveats: a lower borrowing limit, a shorter repayment term, and a higher interest rate.
No credit check loans
Similar to bad credit loans, no credit check loans offer money to those who need it with no credit check at all, rendering your credit score irrelevant. If you were worried about your score, this can be a godsend. But like bad credit loans, they also attract a very high interest rate to provide some security for the lender.
Payday loans are meant to act as a sort of emergency loan, for two to four weeks, or until "payday", as the name suggests. Like the other options, this short-term loan comes with a hefty interest charge.
What Kind Of Long Term Loans Can You Get With Bad Credit?
But if what you're looking for is a long term loan? Is that possible with bad credit? You will be glad to hear that it is, indeed, possible to borrow money long term.
A mortgage is a secured loan that is usually offered for a longer period of time - as in, several decades. The fact that it's secured means you need to have an asset of significant value to put up as collateral. This acts as security against the loan, should you fail to repay. So, if something happens and you find yourself forced to default on the loan, the lender does not lose out on the money, because they get to keep the asset you offered as collateral.
Of course, the downsides of this is that a) you need to own an asset that you are willing to use as security, and b) you might lose the asset if you ever become unable to repay your loan, which makes this a potentially risky option. The good news, however, is that your credit is less important, the interest rate is much lower, because you offer alternative security, and the repayment instalments are usually more affordable, as well.
Very similar to a mortgage, this type of loan works in the same way, but you use your vehicle to secure it. Like the home, you still get to use the vehicle, but you give up the logbook for the period you repay the loan. Once you've paid it off, you get your paperwork back.
Long term loans
There are also options for long term loans that do not require collateral, as they are unsecured loans. The repayment term is not quite as long and the interest rate is higher, but it exists as an option on a market where there are slim pickings for individuals with poor credit.
In conclusion, as you can see, bad credit doesn't mean that you cannot borrow money, or even get a long term loan. There are always options such as secured loans like logbook loans or mortgages, or if that's not a doable option for you, shorter term loans are always available.