Bad Credit Loans Guide
April 24th, 2015
When you have a bad credit score, knowing that you have other options out there in terms of getting a loan is a comforting thought. Banks have probably turned you down, and you might have thought that there was no where else to turn. Getting a bad credit loan can be great, some of these loans are better than others. In fact, some types of bad credit loans are downright dangerous. To help you avoid the bad ones and go with the good ones, below is a quick list of the best bad credit loans, and which ones you should avoid.
- Guarantor Loan – When you are applying for a normal loan, at some point you probably wished that you had someone else’s credit score. If you did, then you could use it to secure the loan that you wanted, and get a loan at a reasonable rate. Well, with a guarantor loan you can do just that. With a guarantor loan you find someone, usually a family member, to act as your “guarantor”. This person then uses their good credit score to get you a loan, while you still make all of the payments. Guarantor loans are great if you have someone willing to be your guarantor, as you can get a much better loan rate than you normally would. However, the downside is that if you fail to make your payments, the responsibility will fall to the guarantor, and this could potentially harm your relationship with them.
- Logbook Loan – If you don’t have a great credit score, you need to find another way to show a lender that you can be trusted to repay the loan. One way of doing this is by putting something up as collateral. With a logbook loan, you use your vehicle as this collateral, and you can borrow an amount relative to the value of your car. Logbook loans are a great way to get a loan quickly, at a pretty reasonable rate, and without interfering in your life. Since you can continue driving your car while you have the loan, there is nothing that will impact your day to day life. The biggest downside with logbook loans is that if you fail to meet payments, you do run the risk of losing your vehicle. However most lenders will work with you to ensure that this does not happen.
- Payday Loan – This is the type of loan that you should probably look to avoid. Payday loans can be tempting because they are easy to get, and they pay out relatively quick. However, since they are giving loans to people with bad credit scores, and because they are not asking for any collateral, these lenders will charge very high interest rates. This is how they protect themselves from people who might not pay back their loans, by charging a large amount to those people that do. In fact, the interest rates are so high that many people find themselves needing to take out a separate loan just to pay back their first payday loan. Unless you have a perfectly planned budget prepared, and you know for sure that you can pay back the payday loan, we recommend looking for an alternative.
- Doorstep Loan – Lastly, there are doorstep loans. Doorstep loans are essentially a type of Payday loan, but with a few differences. For one, the interest rates are sometimes better, depending on the lender. Secondly, with a doorstep loan, you get more of a personal touch. Instead of conducting all business online, a doorstep loan lender will send a representative from their agency to your home to discuss the loan with you. They will deliver the loan, come back to collect payments, and discuss any financial problems that you may be having. If you want a more personal approach to borrowing money, you may want to consider a doorstep loan.