How to Borrow Money with Bad Credit
An emergency such as your car breaking down or your pet being hurt can hurt your pocketbook, especially if you’re between paycheques and your bank balance is low. Fortunately, you may be able to borrow the cash you need to ensure that the bills are paid until your next payday. There are several types of personal loans that you may be able to qualify for, including those listed below.
Secured and Unsecured Loans
Personal loans can either be unsecured, which don’t require any collateral when borrowing money, or secured loans, which do require collateral. Unsecured loans, also known as signature loans, are often used for small purchases or to take care of sudden unforeseen expenses such as a car needing repairs. When money is borrowed with a signature loan, the interest rate is usually higher, the repayment terms are shorter, and the money usually is borrowed from an independent lending institution.
Types of Unsecured Loans
The type of signature loan for which you’re qualified will depend on your credit rating. People with good credit can borrow money without using collateral and they may be eligible for short-term instalment loans in which they have 12 months to five years to repay the loan. These include:
- Automobile loans
- Student loans
- Revolving credit, such as credit cards
Types of Secured Loans
A secured loan is backed by collateral such as your house if you take out a second mortgage or a vehicle, or can be a co-signed loan in which a family member or friend would repay the loan if you don’t make the repayments.
Bad Credit Loans
If you’ve made some mistakes with your finances, you may have bad credit, but you still may be able to borrow money when you need it. Some of the bad credit loans you may qualify for include:
Payday Loans: This type of signature loan, or Wonga as some are called, will allow you to borrow a smaller amount of cash and pay it back when you get your next paycheque. These loans usually have very high interest rates and a personal cheque is usually given to the lender to deposit if you do not repay the loan with cash. Some payday loans from direct lenders may have more generous terms. In a Wonga v Cashfloat comparison, the direct lender, which is Cashfloat, offers early repayments, grace periods for late or missed payments, and an interest cap. These are features that most other payday loan companies do not have.
Logbook Loans: Another way to get needed cash when your credit is questionable is through a logbook loan. Your credit is usually not run when you take out this type of loan but your car, van, or motorbike can be repossessed if you miss payments or default on the loan, so it is a type of secured loan.
There are other types of bad credit loans such as a co-signer loan, which is a payday loan except with a co-signer. The type of loan that you qualify for will depend on your credit and the amount of money you need.