Having a good or excellent credit score has numerous benefits. Amongst other enticing advantages, one of the main advantages that a high credit score offers is that it can help you get approved for financial solutions easily.
On the other hand, with a low credit score, you might feel like you are stranded with limited options for financial assistance. However, there are still some financial institutions that keep customer flexibility in mind. This means that even though your credit score is below average or you don’t have a score at all, you are still eligible for some financial solutions that can help you in your hour of need.
If you are someone who is struggling to get a loan due to your low credit score, here are five alternative options for you. These will not just help you to access credit but also improve or build your credit score.
Let’s get started!
1. Bad Credit Loans
A bad credit loan is for individuals who don’t have a high enough credit score to receive a loan from a traditional financial institution. In other words, a bad credit loan is one of the most feasible solutions that can come to your rescue if you have a low credit score. You can typically use these loans if you need funds for emergencies like pet medical bills, car repairs, job loss, and debt consolidation.
These loans are very similar to personal loans, allowing you to borrow money from lenders and typically repay it in fixed monthly instalments. Lastly, because such loans are provided to individuals with poor credit history, they might come with additional restrictions such as strict payment deadlines, prolonged approval processes, high-interest rates and extra penalties.
2. Secured Credit Cards
Secured credit cards are another viable finance option if you have a low credit score. A secured credit card is a type of credit card that can be issued backed by a cash deposit. The amount that you will put in this deposit will potentially become your limit.
If you fail to make the payment on the set due date, this cash deposit will serve as account collateral, allowing the card issuer to deduct the amount from the deposit. Additionally, if you use the card properly, these cards can help you to improve your credit score significantly.
The application process for these cards is similar to a regular credit card. They are issued by almost every leading credit card lender like Visa and Mastercard.
3. Secured Loans
Similar to secured credit cards, secured loans are a type of financial arrangement where you need to provide collateral to the lender to reduce the lender’s risk of financial loss in case you fail to repay the loan. These loans are a viable finance option if you do not qualify for unsecured loans due to a damaged or low credit score.
A secured loan can be either issued as a business or personal loan. Due to the lower risk on the lender’s end, secured loans are often offered with lower interest rates when compared to unsecured loans. However, some secured loans, such as short-term instalment loans and personal loans especially offered to those with low credit scores, may have higher interest rates.
4. Payday Loans
When you’re facing financial challenges and your credit score is less than stellar, payday loans can serve as a short-term solution. These loans are designed to help you out until your next paycheck comes in, providing swift access to cash when you need it most. These loans can be secured by providing proof of your income and a checking account.
Payday loans are typically more accessible than traditional bank loans, making them an option for you if you have a low credit score. However, they come with some bargains. For example, the interest rates for payday loans can be significantly higher than those of regular loans. Therefore, it is important to compare the cost against the urgency of your needs.
5. Consumer Durable Loans
Consumer durable loans are another versatile financial solution which is designed to make big-ticket purchases more accessible, even though you have a low credit score. For example, you can buy household appliances, electronics, furniture, or other durable goods with these loans. One of the main advantages of these loans is that they are unsecured, which means you don’t need to provide collateral.
Instead, the lenders will primarily examine your income and ability to repay. Although the interest rates might be higher for those with low credit scores, these loans often offer fixed repayment plans, making it easier to budget for your purchase. Therefore, with durable consumer loans, you can purchase essential items along with improving your credit score, giving you a double advantage.
To Sum It Up
Borrowing money, whether through a personal loan or otherwise, should only be done as a last resort because it may demand high interest rates, especially if you have poor credit. Instead, consider making savings for emergencies.
Keep in mind that there are con artists out there who can easily convince you to take out a loan in an attempt to prey on your situation. Before you consider a loan, make sure you get the correct guidance and do your research to make a wise decision.