Life is full of surprises, bad and good. For instance, it reaches a point where you’re cornered by a certain situation, and you urgently need money that you may not have in your bank account. In such cases, taking a loan could be the best option, but getting one can seem like a scary nightmare if your credit score is poor or you don’t have a credit history. It’s even worse if you have bad credit, which often occurs if you’ve defaulted on loan payments in the past or shown delinquency in paying your debts.
But the big question is, can you get an urgent loan despite having bad credit? Of course, you can, and there are several options to consider. However, not all of them may suit you in terms of the money you need, the risks involved, and the costs of getting such a loan. In this article, we will explore a few ways you can get an urgent loan with bad credit.
What’s An Emergency Loan?
Here, the word emergency should spell it all. An emergency loan can be defined as the kind of personal loan you take to finance unexpected expenses, which can range from medical bills to car repair costs after an accident. Perhaps your cheque didn’t clear but you had planned to use the money to sort out your landlord or pay car insurance. Maybe you or a friend just got arrested for a crime they didn’t commit and you need to pay bail fast within a strict deadline. The situations that might prompt you to seek out a loan urgently are literally endless.
Tips To Acquire an Emergency Loan with Bad Credit
As you may already know, the credit score is a crucial factor as far as borrowing is concerned. Most traditional lenders will assess your credit score before approving (or denying) your loan application. This is why it makes sense to consider seeking emergency loans from reputed lenders who won’t charge bizarre fees or have excessively-strict eligibility requirements. You may also want to consider the purpose of the loan, the amount you’re seeking, as well as the terms and conditions. Below are some tips to help you get a loan urgently with bad credit.
1. Add collateral
This is one of the best ways to qualify for a loan when your credit isn’t that impressive. Adding collateral means attaching a valuable asset to the loan, so the lender feels more comfortable and less at risk when lending you the money. This is also called a secured loan, and it is quite common these days. In case you are unable to pay back the borrowed amount, your lender can always use the collateral you provided to pay themselves back and cover the costs of the loan.
2. Seek a co-signer or joint-borrower
If your credit score is wanting, having a co-signer or guarantor can help you qualify for a loan. While the joint borrower gets equal access to the borrowed money, a co-signer or guarantor is only there to convince the lender that you can pay the borrowed amount. Nonetheless, both can be held accountable in case you default on your payments.
3. Approach a credit union
As opposed to conventional bank loans, credit unions tend to be a little more lenient to borrowers. Many of them offer personal loans at lower rates, with their minimum amounts ranging between $500 and $1,000. A good bunch of them will also have personal loan alternatives such as payday loans, which are essentially small amounts to be paid as soon as you receive your next paycheck. These can be a great option for small financial emergencies.
4. Approach your bank
Having bad credit doesn’t necessarily mean doom for your financial future. If you have a good past relationship with your bank, they could have a solution for your cash emergency. The only caveat is that each bank has its own operational protocols and procedures, and not all banks will offer you a loan if your credit is on the rocks.
Other Options to Consider
Apart from cosigner loans, credit union loans, payday loans, and secured loans, you may have a few more options when seeking a loan with bad credit. Some of these include the following:
● Title loans:
Title loans are based on the worth of your car, which is assessed by the lender before they offer to give you a percentage of that value. If you agree, the lender will keep the title to the vehicle and you will get your money.
APRs of 200 percent to 300 percent are not uncommon when the lender doesn’t check your ability to pay back the loan. Because the lender retains the title to your car, these loans are often riskier. If you can’t pay up, they’ll take your vehicle.
● Pawn loans:
Compared to payday and auto title loans, pawn loans have lower APRs, but the risk remains the same: rates over 100% and the potential loss of something of value to you. When you get a pawn loan, you turn over a valuable object to a pawnshop, which then assesses its market value and issues you a loan. You risk losing your item unless you pay back the loan, plus interest, and in full.
Moreover, there is a risk of finding yourself in a cycle of debt. Paying off the loan but finding it difficult to save enough money to cover the interest could lead to another trip to the pawnshop.
Choosing A Bad Credit Emergency Loan
Picking a bad credit loan to fund an urgent need doesn’t have to be rocket science. Among other things, you just have to know what you need, where to find it and how much it will cost you. Below are some tips you may find helpful when choosing an urgent loan with bad credit.
- Think about funding speed – Of course, your urgency should set the pace when deciding which lender to pick for a bad credit emergency loan. Some lenders will fund your need within twenty-four hours, whereas others will take a few days to a week. It pays to familiarize with the approval timelines before making an application.
- Compare the total cost – Remember, lenders are in the business to make a profit. The trick here is to pick the most convenient loan without necessarily paying too much interest. A recent article on sfgate.com about the best bad credit loans of 2021 mentions the annual percentage rate (APR) as a key factor to consider when choosing an emergency loan with less than perfect credit. Comparing loans from different providers can help you save a decent amount of money each month or year.
- Monthly payments – Taking out an emergency loan only means one thing. A considerable amount of your income will go towards paying back the borrowed money for the next coming weeks, months, or even years. Therefore, you want to make sure you can comfortably afford the monthly payments, which are determined by the loan amount, term, and rate.
To sum it all up, bad credit doesn’t completely cement your ability to borrow. Conventional loans could be out of the question, but people with poor credit scores still have a few options to consider when seeking an emergency loan. The above brief guide should suffice when seeking a loan urgently with an unpleasant credit score.