If you have a low credit score but you need money to cover unexpected expenses, you may not know what your options are. Can you get a personal loan with a low credit score? Are there other options out there?
In this blog, we’ll discuss a few different options you have for short term loans, and help you decide which choice may be right for your own unique financial situation. Read on to learn more.
Types of Personal Loans
1. Short Term Loans from a Bank, Credit Union, or Online Lender
First, let’s start with one of the most obvious types of personal loan – a short term loan from a bank, credit union, or an online lender.
If you have a low credit score, you’re usually better off looking for personal loans online. This is because online lenders usually have lower credit requirements compared to “brick-and-mortar” banks and credit unions.
This type of loan is unsecured, meaning you do not have to put up any collateral. It’s usually possible to get a personal loan that ranges from 12 months in length to up to 5 years or longer. However. The interest rate you get will depend on your borrowed amount, credit score, and a number of other factors.
However, it may be very hard to get short term loans if you have a credit score under 550 – this is typically the minimum for this type of personal loan. So, do you have any other options? The answer is “yes.”
2. Payday Loans
Payday loans are a decent option if you need cash fast for an emergency and will be able to repay your loan quickly. In most cases, there are no credit score requirements for payday loans. You can usually borrow money for between 2-4 weeks.
Then, once your loan comes due, you will have to repay the loan and all of the applicable fees and interest charges. This can be a bit expensive. Typically, payday loans cost somewhere around $20-$25 per $100 borrowed, so make sure you never borrow more money than you need if you choose a payday loan.
Still, if you’re in need of some quick cash before your next payday and you’re sure you’ll be able to repay your loan, a payday loan is a good option, especially if you have a low credit score. They also do not require any collateral, unlike title loans.
3. Title Loans
Title loans are similar to payday loans, but you must put up your car as collateral for the loan. In a title loan, you give legal ownership of your vehicle to the title lender, who may repossess the vehicle if you don’t repay your loan. However, you will keep your car and your keys, and can drive your car normally.
This means that the lender has a lot less risk, but you may lose your car if you don’t repay the loan. For this reason, you can usually qualify for a title loan regardless of how low your credit score may be, so this is a reasonable option for some people.
Title loans are usually issued for a month, but some lenders offer long-term “instalment title loans” that may be issued for up to a year.
The charges for a title loan are usually similar to those of a payday loan, at around $20 to $25 per $100 you borrow. In addition, you can usually borrow a lot more money, since your car is acting as collateral for the loan.
However, you must be very sure that you can afford to repay the loan when it comes due. If you are not able to repay your loan in time, you may face high charges and penalties from your lender, and your car may even be repossessed and sold, leaving you in an even more difficult financial situation, and without a reliable means of transportation.
Know Your Options for Short Term Loans and Personal Loans – Make the Right Choice!
If your credit score is above 550, it may be possible to get a personal loan or short term loan from a bank or online lender, and it’s worth trying to apply even if you have a lower score, since personal loans are usually cheaper than title loans or payday loans.
However, if you have a really low credit score and need cash fast, title loans or payday loans may be a better option, as you can typically qualify even if you have no credit. Just remember that these types of loans are usually more expensive and ensure you will be able to repay your loan when it’s due.