Intro: Loan Companies for Bad Credit Borrowers
When looking for loan companies, bad credit can often let you down. This can make finding the right loan provider a daunting task, and without the proper know-how, you can wind up in some difficult situations.
Before beginning the hunt for a bad credit loan company, however, there are several points that you should be on the lookout for. You need to make sure the lender you choose is transparent with their services and offers you full disclosure.
Typically, borrowers with bad credit will be charged higher interest rate than those with a steady credit score. Your bad credit loan company should be clear with you on the fees that they charge, and you should avoid any that aren’t upfront about their policies.
You also need to pay close attention and make sure you avoid aggressive lenders and scams built with the intention of trapping you in debt.
A loan is by no means a final solution to your money problems and can even exacerbate them, but a solid agreement from loan companies for bad credit can provide you with the additional support you might need from time to time.
Especially with a history of bad credit, loan companies can act as an excellent temporary solution to help you get a handle on your personal finances and get back in control of your day-to-day life.
In such a detail-heavy industry, however, finding the right option can be a difficult task. That’s why AdvisoryHQ has prepared this guide to show you how to find loan companies for bad credit.
1) Don’t be afraid to contact your bank
Before starting out on your search for a bad credit loan company, it might be best to look a little closer to home first.
If you haven’t already checked, getting in touch with your local bank and asking for a loan could work for you. Contrary to popular belief, banks don’t always turn down borrowers with bad credit histories, so it’s worth your time to check in with them first.
Your bank will already have detailed information on your average monthly balance, deposits, and withdrawals, so they will be in a better position to approve or decline your loan request. If you’re offered one, they’re likely to offer you a better interest rate than a loan company for bad credit.
Check out your current bank’s website or book an appointment with a representative at your local branch. They’ll be able to go over the different types of loans they offer and assess whether you’re a good match.
If they decide you’re unsuitable due to a history of bad credit, loan companies will still be available. If you ask, they’ll hopefully be able to point you in the right direction for improving your future score.
It’s time-consuming and requires dedication and patience on your part, but building a better credit score is the best way to secure a good loan deal.
While you can request an annual credit report for free, you will have to pay a few dollars to find out your score. Once you have it, your bank will be able to talk you through what you need to do to start building a better score.
2) Get in touch with your local credit union
If you’ve already checked with your bank or don’t think this is the right option for you, it could be worth speaking with a credit union.
Distinct from banks, credit unions are owned and run by their members.
These members work together based on a shared bond, such as location, religion, community, or place of employment.
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Instead of relying on financial support from big lenders or the government, credit unions combine their members’ savings and investment portfolios to provide more cost-effective loan packages and other financial services.
Credit unions offer far more services to their members, including loan services such as small business support, farm development, education, and family support.
Since they’re self-funded, credit unions can often offer better interest rates than loan companies for bad credit. These rates are significantly lower than those offered by big banks.
The main benefits of credit unions for those with bad credit include:
- Reduced banking charges – The majority will offer low, set charges for overdrafts and ATM withdrawals.
- Low minimum balance requirement – Most credit unions accept a minimum balance of $5-10.
- Highly-competitive interest rates – Average loan interest rates at credit unions in 2015 were 2.70%, according to the Association of Federal Credit Unions (banks came in at a comparably steep 4.72%).
- Fewer loan restrictions – Credit unions are less strict than banks with loan requirements. Like loan companies for bad credit, they aren’t bound by typical bank standards, meaning bad credit isn’t always an obstacle for them.
Prior to contacting loan companies for bad credit, consider putting in a call to your local credit union to discuss what they can offer you. With their focus on customer service and community foundation, you might be able to get a great loan deal without having to involve yourself with aggressive lenders and shady terms and conditions.
Credit union membership is non-discriminatory, meaning that all unions are required by law to have open membership. For this reason, they’re certainly worth considering as an alternative to a bad credit loan company.
3) Be aware of the different loan types that bad credit loan companies offer
When looking for a loan company for bad credit, it’s important to know about the different types of loans available. For borrowers, there are two main types: secured and unsecured loans.
The first type is a secured loan. A secured loan gets its name because you offer the lender some form of security when you take it out. This is usually a concrete asset such as your house or car.
Although secured loans often come with lower interest rates, careful thought should be made before settling on this decision.
If you default on a secured loan, the bad credit loan company has the authority to seek compensation from the assets you used to secure the loan. This means that, if you miss a payment, you could lose your house.
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Secured loans from loan companies for bad credit do have their benefits, however:
- Reduced suitability criteria – Since you’re offering the lender security in the form of a concrete asset, they’re usually less selective about who they offer loans to.
- Increased borrowing amount – This security gives loan companies for bad credit more confidence to lend larger amounts.
- Flexible repayment plans – A bad credit loan company will be more willing to let you repay your loan over a longer period.
Remember: these benefits are offered because the loan is secured with your house. You need to carefully set out a repayment plan and work out your finances before moving forward with any loan companies for bad credit.
Unsecured loans and personal loans are terms used by loan companies for bad credit, but they both refer to the same thing.
Personal loans are referred to as unsecured loans, loans that do not require you to offer security, such as your house with a secured loan.
Unsecured loans are facilitated by a credit agency performing a credit check on your financial situation. If you have a previous history of bad credit, the process to getting an unsecured loan might be more difficult than if you have a healthy credit rating.
Unsecured loans are offered less often to individuals with bad credit, but there are still options available to you. Inquire with a bad credit loan company to see what they can offer you.
4) Find a top loan company for bad credit through peer-to-peer lending
Since its creation in 2005, peer-to-peer lending has become a popular means for individuals to find a bad credit loan company. That’s largely because you’re not actually borrowing money from loan companies for bad credit at all.
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Peer-to-peer lending networks such as Upstart allow individuals to connect with other users who are looking to finance loans.
“You are more than your credit score. On Upstart, your education and experience help you get the rate you deserve”
On Upstart, your loan eligibility is determined based on factors further than just your FICO credit score. Upstart allows lenders to take into account your education, academic performance, and employment history, providing them with a more detailed insight into you as a person.
Loans with Upstart range from $3000 to £35,000 and can be used for anything from paying off your college fees to funding home redevelopment. Unlike loan companies for bad credit, Upstart sets interest rates based on each individual’s personal situation.
Upstart has become particularly popular with the younger generation of people aged 20-30. These are typically people who don’t have a proven credit history and therefore find it difficult to get a bank loan, but who would commit to repaying it in full. With bad credit, loan company interest rates would be considerably higher for them. You can find out more information about Upstart here.
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Prosper Marketplace is a viable option for those looking for a bad credit loan company with a difference. Ranging in size from $3,000 to $35,000, Prosper connects individuals with loan companies for bad credit and individuals looking to lend.
Offering an unbiased service, Prosper frequently arranges the financing of loans for purposes like:
- Debt management
- Vehicle purchases
- Property renovations
With terms of 3-5 years, Prosper Marketplace offers flexible repayment plans that are ideal for individuals seeking a loan company for bad credit.
For individuals who have previously been turned down by banks for bad credit, a loan company or P2P lending is an option well-worth exploring.
5) Use comparison sites for personalized bad credit loan company recommendations
When searching for a bad credit loan company, price comparison websites like MoneySupermarket are an excellent resource.
With so many different loan companies for bad credit, it can be difficult finding the one that’s right for you. Price comparison sites are the answer to that problem.
By quickly filling out some personal criteria, price comparison sites such as Money Supermarket return results that are specifically relevant to you. This makes it easy to filter out bad credit loan companies with stringent terms designed to keep you in debt.
In addition to not further damaging your credit score, Money Supermarket is also able to return results with the highest chances of granting you your loan.
By searching the internet for bad credit loan companies, Money Supermarket can return results of loans with repayment terms of up to 25 years.
It’s important to bear in mind, however, that these will most likely be secured loans. As long as you’re okay with this, Money Supermarket will ask you for information including:
- Loan purpose
- Loan amount
- Loan term
- Your annual income
- Your homeowner status
- Your employment status
Based on your answers, the search engine will return results suited to you.
6) Consider alternatives to bad credit loan companies
Signing up with loan companies for bad credit isn’t always hard to do, but it’s serious business. Prior to getting involved, it’s worth considering a couple of other options that might be available to you.
- Get a loan from friends and family
If you’re looking for a smaller-sized loan, borrowing money from your friends and family might be a good way to avoid high interest rates and strict terms.
If you borrow from your friends or family, however, it’s important to treat it as if it were a loan from a company. To keep things as simple as possible for both parties, draw up a formal document detailing the amount loaned, the repayment terms, and the interest (if any). To save you some time, free documents of this nature can be downloaded online from the Rocket Lawyer website.
- Find a co-signer
If you want to avoid loan companies for bad credit and your friends or family are unable to give you a loan, it could be worth asking if one of them would be willing to sign a loan with you.
If you have a willing friend or family member with good credit, having them co-sign a loan agreement with you will likely get you a better deal.
It’s important to remember, however, that if you fail to repay the debt, the loan company will look to the co-signer for repayment. Think carefully before you enter into an agreement and make sure you’ll have the money to pay off the debt.
We hope you’ve found this article helpful. If you’re finding it difficult to get a loan and don’t want to get involved with bad credit loan companies, do what you can to improve your credit score.
It’s not an overnight fix, but a higher credit score will open more flexible and affordable loan opportunities to you, meaning loan companies for bad credit aren’t your only option.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
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