2017 Guide: Bad Credit Loans | 6 Ways to Get Loans for People with Bad Credit or No Bank Account
Loans are an important tool to use when purchasing a car, a home or for credit card and student loan debt consolidation. For many loans, a high credit score is needed in order to ensure less risk for the financial institution.
This dependence upon credit score can certainly be a deterrent for those who have less-than-perfect credit.
Thankfully, there are plenty of bad credit loans that are specifically structured to be offered as loans for people with bad credit. Loans for bad credit allow individuals a chance to create a budget and begin managing finances.
They also make it possible to increase your overall credit score by demonstrating the ability to repay a loan in a timely, organized fashion.
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In examining how to find loans for people with bad credit and no bank account, our review will first answer three common questions about the different types of bad credit loans. These three questions are:
- What is the difference between secured and unsecured loans for people with bad credit?
- What are installment loans for people with bad credit?
- What types of bad credit loans should be avoided?
For those looking for home loans for people with bad credit or car loans for people with bad credit, our 6 ways to find the best bad credit loans can provide expert guidance throughout the entire process.
Finding bank loans for people with bad credit can not only provide financial stability and budget management, but the best bad credit loans can also be valuable tools in bringing borrowers out of financial debt and into financial security.
Thankfully, having poor credit does not need to block potential borrowers from getting the financial assistance that they need.
What Is the Difference Between Secured and Unsecured Loans for People with Bad Credit?
An unsecured loan is defined by a loan that is given without any sort of collateral. These types of bad credit loans are given in good faith, without requiring the submission of added security like a car title.
As a result, unsecured loans for people with bad credit often have much higher interest rates when compared to secured loans.
A secured loan, however, is a loan which does require collateral. The most common types of assets that are used in a secured loan are car titles and house deeds.
If secured bad credit loans are not paid according to schedule, the borrower must surrender any assets used to secure the loan. A secured loan is often not a desirable or even a feasible loan for people with bad credit, as there is a high level of risk involved when securing assets.
Bad credit loans will fluctuate mainly between these two different types of loans for people with bad credit. Understanding the difference between the two is crucial when determining which loans for bad credit are right for you.
While an unsecured loan may have drastically higher interest rates, a secured loan will naturally carry much more risk.
As a supplement to secured and unsecured loans for people with bad credit, there is another segment of bad credit loans that each and every lender should be aware of: installment loans.
What Are Installment Loans for People with Bad Credit?
Installment loans for people with bad credit are actually quite common. In fact, they operate on the same system that many traditional loans do, like mortgages and car payments.
An installment loan has a set number of scheduled payments over a set period of time.
Installment loans for people with bad credit often last for many months, and payments are spread out evenly throughout the life of the loan.
Since installment loans typically last longer and require a regular payment schedule, they can be very effective loans for people with bad credit.
Installment loans for people with bad credit can either be unsecured or secured. Choosing the best bad credit loans may mean deciding whether improving your overall credit score is part of your financial goals. If so, then installment loans can be great loans for people with bad credit.
While the structure of an installment loan is the accepted structure for nearly all loans, when considering loans for people with bad credit and no bank account, these types of loans for bad credit can be potentially dangerous.
Exceedingly high interest rates and unmanageable minimum payments are common attributes of bad credit loans that use the installment loan model.
In fact, a recent study by the National Consumer Law Center found that 4 states have no cap or ban on interest rates for some categories of installment loans for people with bad credit. Another 4 only adhere to unconscionable standards. For these types of loans for bad credit, it is even more crucial to closely examine loan terms and conditions.
While installment loans, secured loans, and unsecured loans for people with bad credit are all potential options, there is another category of loans for people with bad credit. Most financial experts agree that potential borrowers should avoid this category of bad credit loans.
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What Types of Bad Credit Loans Should Be Avoided?
The biggest offender of predatory loans for people with bad credit are known as “payday loans.”
These personal loans for people with bad credit are marketed as a way to assist borrowers in paying their bills until their weekly paycheck arrives. In return for the loan, the borrower must provide a post-dated check to cover the borrowed amount and any additional fees.
Essentially, payday loans are installment loans for people with bad credit, but with a much shorter payoff term. Payments are condensed into weeks or even days. Additionally, state laws tend to vary greatly in their governance of these loans for people with bad credit.
Payday loans have been long accused of becoming a predatory lending process. These bad credit loans often exploit borrowers and introduce them to a cycle of lending debt. With short loan terms and high interest rates, paying off these loans for people with bad credit can be nearly impossible.
For example, a study by the NCLC showed drastically high interest rates for a typical $500 payday loan. A total of 13 states allow interest and fees that could potentially elevate the APR up to 54%.
Additionally, for that same loan amount, another 10 states allow for fees that could bring the APR between 61–116%.
These types of bad credit loans offer quick cash for exorbitantly high interest rates, often making it impossible to pay back the loan. Unfortunately, payday loans are deliberately marketed as loans for people with bad credit, as they base loans off income instead of credit scores.
When looking for bad credit loans or loans for people with bad credit and no bank account payday loans are rarely a viable option and should be avoided at all costs.
6 Ways to Get Loans for People with Bad Credit and No Bank Account
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Finding bank loans for people with bad credit can certainly be an agonizing process. Loan denial due to a low credit score is not only frustrating, but it can often be unfair. Bad credit can mean different things to different lenders, so, even with fair credit, borrowers may find themselves getting denied.
It is no wonder that borrowers often find themselves getting discouraged during the process of searching for loans for people with bad credit.
Thankfully, there are plenty of lending options for loans for people with bad credit. Whether looking for home loans, personal loans or car loans for people with bad credit, the key is knowing where to start.
Our expert tips will provide guidance for those looking for bank loans for people with bad credit.
1. Get a Free Copy of Your Credit Report
Taking an in-depth look at your credit report is a great way to begin working towards getting loans for people with bad credit.
Looking at your credit report will provide two important benefits before obtaining bad credit loans:
- Errors or miscalculations can be solved
It’s fairly common for credit card companies and various debtors to misrepresent credit report information. Paying off a balance owed in full might be accidentally listed as “settled for less than full amount.” Even though the debt is paid, this small error can drastically drop your credit score. Monitoring your credit report is the best way to ensure that all settlements and debts are recorded accurately and fairly.
- Plans for improving credit can be established
Getting bad credit loans should be a temporary solution – not a permanent one. While loans for people with bad credit do exist, they should not be utilized over long periods of time. As a supplement to obtaining a loan for people with bad credit, a credit report can be used to identify areas for improvement.
Additionally, personal loans for people with bad credit can be utilized towards consolidating debts. Planning on how to use bad credit loans is just as important as obtaining them. Analyzing a credit report may provide opportunities to apply loans for people with bad credit towards resolving prior debts.
Each and every consumer is entitled to one free credit report from each bureau every year. Still, there are a few agencies that allow for free credit reports at any time. Credit Karma is a great tool for constant credit monitoring and expert advice, both of which come absolutely free of charge. Similarly, FreeCreditReport.com offers free credit report checks from Experian.
2. Ask Your Local Credit Union About Bank Loans for People with Bad Credit
For bad credit loans, a good starting point is to ask your local credit union if it provides bank loans for people with bad credit. Credit unions typically offer low interest rates, as they are not-for-profit organizations.
If you don’t have a savings or checking account through your local credit union, it may be worthwhile to establish a banking relationship while searching for bad credit loans.
With relaxed requirements on credit scores, credit unions may offer loans for people with bad credit.
As banks continue to diversify and adapt to changing financial environments, credit unions are becoming increasingly service-oriented and credit-friendly to maintain competitive banking products.
Opening a credit union account can have widespread positive implications for borrowers looking for loans for people with bad credit.
Credit unions typically offer free banking services, with no minimum balance requirements. These benefits can be crucial supplements to finding and paying off bad credit loans.
3. Consider a Home Equity Line of Credit
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These loans for people with bad credit are possible if the borrower owns a home and has equity in it.
These types of bad credit loans help secure a line of credit with manageable interest rates, and no restrictions on how the money is spent. The line of credit may even be tax-deductable, depending upon certain limitations.
In order to qualify for a home equity line of credit, borrowers will need to have a loan-to-value ratio of 80%. Lenders will typically also need proof of income and a relatively low debt-to-income ratio.
Of course, the risk for these bad credit loans is typically quite substantial, with the home being put forth as collateral.
While there may be more restrictions and more risk, this category of loans for people with bad credit also offers a few more options. Interest rates are lower than most bad credit loans, and there are even adjustable-rate loans available.
For borrowers who have a reliable income and discipline in paying bills, a home equity line of credit is a great way to secure home loans for people with bad credit independently from a credit score.
4. Apply for a Peer-to-Peer Loan
Instead of borrowing from a financial institution, you can choose to borrow from an individual through a peer-to-peer loan.
Borrowers looking for bad credit loans will post a listing of the loan amount and the reason for borrowing, and lenders choose loans that they want to finance.
More often than not, an individual investor will be much more sympathetic to poor credit than a financial institution. Low credit scores can be discussed and explained, making peer-to-peer lending a more forgiving process overall for obtaining loans for people with bad credit.
While this may be a nontraditional method of obtaining loans for people with bad credit, peer-to-peer sharing is certainly a worthwhile method to consider when looking for bad credit loans.
5. Use Lead Generators to Find Bad Credit Loans
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A lead generator will take your general information and use it to match you with a list of lenders who offer bad credit loans.
This is a popular method to search for car loans for people with bad credit. For example, Blue Sky Auto Finance and MyAutoLoan.com are two widely popular generators to find bad credit loans to apply towards a car.
Lead generators can often be a double-edged sword: while they provide quick and easy connections to lenders who offer loans for people with bad credit, they may be more interest in marketing.
This means that a lead generator could distribute your contact information to dozens of lending companies, resulting in solicitation emails and calls.
To avoid this annoyance, only use lead generators that publicly specify that they are neither lenders nor brokers.
Online lead generators can be a useful tool towards finding a wide array of lenders that offer loans for people with bad credit.
6. Be Aware of Scams for Bad Credit Loans
While there are plenty of valid options for bad credit loans, many borrowers who are looking for loans for people with bad credit may fall victim to loan scams.
Having bad credit may place borrowers in a vulnerable position, and they may be more susceptible to fraudulent bad credit loans. When looking for loans for bad credit, be aware of these warning signs:
- Immediate guarantees: Lenders who issue guarantees for bad credit loans without first obtaining information may not be a legitimate lending service.
- Application fees: It is against the law for lenders to charge additional fees just for filling out an application.
- Repeated requests for personal information: Lenders who offer loans for people with bad credit will, of course, need some personal information. However, if a lender is pressuring for personal information, this could be a warning sign. Make sure that you give out personal information sparingly and only when you feel comfortable.
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Conclusion: How to Get Approved for Bad Credit Loans
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Finding the best loans for bad credit means locating lenders who are transparent and honest about their rates and fees, flexible on their lending terms, and willing to view each and every lender as an individual rather than simply a credit score.
Whether looking for personal loans for people with bad credit or for home and car loans for people with bad credit, there are many loan factors to consider.
This certainly includes lenders who may offer a loan for people with bad credit as a scam, furthering the cycle of debt.
By staying informed, flexible, and motivated, anyone with poor credit can find the right loans for people with bad credit. Though finding bad credit loans takes a little extra effort, it is entirely possible.
Our expert tips are designed to help find loans for people with bad credit and no bank account, ensuring that your credit history does not dictate your lending future.
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