August 12, 2019
In the United States, 16% of people have credit scores below 580. A score below 580 is considered quite low, and could seriously affect your ability to take out any sort of loan. While unsecured loans for bad credit borrowers are available, they aren’t great options due to high interest and fees. Also, with quick cash loans, bad credit borrowers can obtain a loan in a short period of time. However, these loans are impractical for the same reasons.
What are Unsecured Loans?
If you’re considering contacting a lender that offers unsecured loans for bad credit borrowers, it’s important to understand the basics of an unsecured loan and how it differs from a secured loan.
The main difference between unsecured and secured loans is that secured loans are attached to a piece of collateral. This collateral can be anything from your car or house to a valuable piece of jewelry. If you take out a secured loan and don’t pay back by the agreed date, the lender has the right to seize the collateral to make up for lost money.
For those with bad credit, secured loans are generally easier to obtain since the lender may not trust you to pay back. Additionally, the interest rates for secured loans are usually lower than the interest rates for unsecured loans. However, many are uncomfortable taking out a secured loan because there is a chance that you could lose a valuable possession. In the end, both unsecured and secured loans have major drawbacks, so other alternative are worth looking at. In the case of unsecured loans, high interest and hidden fees are not ideal for most. With secured loans, the threat of losing a valuable possession is enough reason to avoid them.
“Both unsecured and secured loans have major drawbacks, so other alternative are worth looking at.”
Should You Use a Co-Signer?
A co-signer is another individual that applies for a loan with you. Ideally, your co-signer should have adequate income and a strong credit score. This way, the lender is more likely to sign off on your loan.
A co-signer can save you time and effort while increasing the likelihood that your loan will be approved. However, it’s important to understand the responsibilities you are handing to your co-signer. Should you be unable to pay back your loan, the lender will target your co-signer and try to collect funds from him/her. If your co-signer is also unable to pay the loan, his/her credit score may be negatively affected.
Unsecured Loans for Bad Credit
If you’re looking to borrow money through an unsecured loan and have bad credit, the first step is to understand your options. One option is to ask your local bank or credit union, since they often offer unsecured loans for bad credit borrowers. Find a reputable one so you can avoid predatory fees and high interest rates. Still, you must understand that you’ll always be charged some interest and fees, so this may not be the most ideal option.
Unfortunately, it is harder to get an unsecured loan at a bank or credit union if you have bad credit than it is at a smaller, less reputable company. If you are unable to get a loan from a bank or credit union, you can try to get one from an online lender or a payday loan company. This should not be your first option, since many practice predatory business practices including excessive fees and interest rates that commonly exceed the loan amount itself. Some online lenders that specialize in loans for bad credit borrowers have APRs up to 200% or 300%! Avoid this at all costs.
Another solution you could try is a financial wellness app called Brigit. Brigit is better than the other options because there is no credit check, interest, or hidden fees. Consider signing up for Brigit, and you may be eligible up to $250 in cash when needed.
Quick Cash Loans for Bad Credit
If you need funds as soon as possible, quick cash loans may seem attractive. With quick cash loans, bad credit borrowers can obtain an unsecured loan in a short amount of time. When seeking quick cash loans, bad credit may be an obstacle if you’re looking to borrow from a traditional bank. Online cash lenders will be more likely to help, but beware of high interest rates and predatory fees. You don’t want to end up paying more in interest and fees than you received from the original loan. Due to the non-interest fees, a better option if you need cash is to sign up for Brigit.
