If you need or want to borrow money, and you have bad credit, you may be worried that your credit score will work against you. While it can be more challenging to find a loan when you have a poor credit score, there are many providers out there that offer bad credit loans. If you’re considering submitting an application for a loan, it’s wise to do some research first and to make sure that you have all the information you need to make the right choice. If you’re unsure what kind of loan to apply for, this quick guide to different loan types should come in handy.
Types of loans for bad credit
If you have bad credit, this doesn’t mean that you can’t borrow money. There are various types of loan that may be available to you if you have a low credit score. The most common types include:
- Personal loans: personal loans are the most common type of loan. This kind of loan is often classed as an unsecured loan, as you borrow money without any collateral, for example, a house or a car. In this case, a lender will evaluate your application based on your credit history. If you have bad credit, you may find that the terms are less favourable than they would be for a client with good credit, but there are several lenders out there that offer bad credit loans.
- Secured loan: sometimes known as a homeowner loan, a secured loan offers you the option to borrow money against collateral. This can be a property, a car or anything else that is valuable. If you take out a bad credit loan, and you default on the payment, the lender can recover your debts via your collateral.
- Guarantor loans: if you have bad credit, you can maximise your chances of being able to borrow money by providing a guarantor. A guarantor is a third party, which offers assurance that the loan will be repaid. If you can’t afford the repayments, responsibility will fall to your guarantor.
- Non-guarantor loans: it can be difficult to find a guarantor in this day and age, as many people don’t have a high credit score. If you don’t have a guarantor, look for providers that offer no guarantor bad credit loans. This will save you time and prevent you from being rejected based on the fact that you don’t have that safety net.
- Payday loans: payday loans are often used as a short-term solution for cash-flow issues. You borrow money on the proviso that you pay it back when you next get paid. Most lenders specify a repayment window of 2-4 weeks.
Are you thinking of borrowing money? Do you have bad credit? If so, it’s hugely beneficial to shop around, find out about different loan types, and take advantage of personalised searches carried out by Bonsaifinance.co.uk. You can compare offers from an array of lenders in an instant, and you can modify your criteria to find the perfect product for you.