Credit history greatly affects our ability to get loans. Those with an excellent credit history can easily lend large sums and expect low-interest rates.

People with bad credit have a more challenging time. They are forced to look for at least some opportunities to borrow money, no longer looking so much at interest rates. They know they have committed (sometimes accidentally) credit mistakes, and now they are paying with their money and comfort.

What is Bad Credit?

Perhaps it is worth starting with the fact that there is a credit rating system in America. It is based on data held by one or more of the three major credit bureaus: Equifax, Experian, and TransUnion.

The data held by credit bureaus contains everything that happened to your credit history. Every payment, every delinquency or early repayment – it all adds up to your credit score.

Of course, when you overdo the payment, even for one day, this is reflected in your credit history. And the more days you miss, the lower your credit score goes down.

The greatest damage to credit history is, of course, bankruptcy. But even smaller “credit misdemeanors” affect credit history.

Loans for Bad Credit

However, no matter how low your credit score is or how bad your credit history is, do not despair. You can still borrow money, and there are several different options.

Payday loans

A payday loan is emergency money. It is short-term, and only a limited amount can be received. Justifying its name, a payday loan is usually issued for two weeks or a month. You can borrow up to $ 1,000, but usually, the amount is much more modest – $ 500.

The undoubted advantage of a payday loan is that the lender usually looks solely at income but not credit history. In addition, it is really easy to get, even online. You can get access to money, if not on the same day, then on the next business day.

The disadvantages of a payday loan are primarily high-interest rates. Also, the entire amount with interest and fees must be returned in a single payment after a fairly short time.

Car title loans

Car title loans are also short-term loans available to borrowers with bad credit. However, unlike payday loans, you will need collateral – your car.

Most often, the term of such a loan is 30 days. You can get from 25% to 50% of the car’s market value. Pros: you will quickly receive the necessary amount, and it will most likely be more than if you took a payday loan.

Cons: high-interest rates, short loan term, risk of losing the car if the loan is not repaid.

Personal loans

Personal loans are long-term. They can be either unsecured or secured. The amounts that can be borrowed are usually much larger, and the terms are much longer than for the loans mentioned above.

Although personal loans for bad credit are still more expensive than those for people with a high credit score, they are still cheaper than payday loans and title car loans.

Personal loans for bad credit allow you to borrow up to $15,000, with terms ranging from 12 to 84 months.

In addition, if you repay such a loan on time, it will help improve your credit history.

Peer-to-peer lending

Peer-to-peer lending is a system in which individual investors fund loans to potential borrowers. Conditions may vary and depend on income, credit history, etc. However, those issued using peer-to-peer lending networks often have lower interest rates than payday or car title loans and can offer both longer repayment periods and larger loan amounts.