When it comes to personal loans, there are two types you can apply for: secured and unsecured loans. However, if you are having trouble qualifying for a personal loan, consider other bad credit loans.
Secured and unsecured personal loans for bad credit
Conventional personal loans can be either secured or unsecured. Secured loans require you to provide something of value (also known as collateral), such as your car, savings account, or home, to support (or insure) the loan. The lender can take back the collateral if you default or default on the payment. This makes them less risky for the lender, which also means that they tend to come with more favorable terms, such as lower interest rates, and lower qualification requirements.
On the other hand, unsecured loans are the more common of the two and do not require any collateral. Since these loans do not require collateral and therefore pose more risks to the lenders, they usually come with more qualification requirements and higher interest rates. All loans on this list are unsecured personal loans.
Student loans for bad credit
If you’re trying to cover higher education expenses, a bad credit student loan is probably the direction you’ll want to look for. Although private student loans usually require good credit, borrowers with bad credit can get federal student loans, which do not require a credit check. Federal loans also come with more flexible repayment terms, including a tolerance if you work in the public service or choose certain repayment plans.
Auto loans for bad credit
A car loan is a secured loan that uses your car as collateral, which means the lender can take back your car if you default or default on the payment.
Similar to personal loans, car loan qualification requirements are different for each lender and agency. While we recommend a minimum credit score of 670 for the best terms, you can still qualify for a lower grade auto loan as long as you meet debt-to-income (DTI) requirements and make a larger down payment.
Payday loans for bad credit
Payday loans are short-term loans in small dollars (usually up to $500) that you pay off as soon as you get your next paycheck, usually two to four weeks after you get the loan. Many lenders do not need a credit check, which is often tempting for people with bad credit. However, do not get your hopes up. Payday loans come with a lot of their own risks and high fees. Consider other alternatives first, such as personal loans or borrowing money from friends and family.
Mortgage Equity Loans and HELOCs for Bad Credit
If you have enough equity in your home—the current market value of your home minus the remaining mortgage balance—you may be able to get a home purchase loan or a home purchase line of credit (HELOC). Both allow you to withdraw against your home, which means that your home secures the transaction and the lender can take it back if you fail to repay. However, real estate equity loans are disbursed as lump sums while HELOCs restrict you to withdraw funds on an as-needed basis.
But borrowers with poor credit scores are not likely to qualify for these loans. Most traditional lenders require a minimum score of between 600 and 620. There may be a specialized lender or credit union that would be an exception, but it is not common. People with scores less than 600 will have to go through hard money lenders, such as private investors or companies, rather than through banks. While hard money lenders are more flexible, they are usually a more expensive route.