At one point in your life you may need to apply for some credit just to get by. You could have multiple options such as applying for a credit card, borrowing money from loan sharks or from your family and friends, or applying for different kinds of loans from banks and other financial institutions. But if you are one of the many people who have a bad credit score – probably because of missed monthly repayments, or unpaid debts, then you might have a tougher time getting approved for such loans or credit card applications. You may be left with an option to loan money from loan sharks or from people you know, but that might just leave you with even higher debt to pay off because of the ludicrously high interest rates they may give you. Borrowing money from sketchy channels is just too much of risk and lucky for you, even if you do not have a good credit score, you may not have to. There are financial institutions who actually approve unsecured bad credit loans applications. If you are lucky enough, it might just be the right kind of loan for you.
Secured vs Unsecured Loans
Basically, secured and unsecured loans are generally the same. The main difference between the two relies on the assets a person owns. Secured loans are named in such a way because the loans applied for will be secured against an asset, such as your home or property. It serves as a collateral for you the loan you will take it so in turn, if you would be unable to pay off the monthly repayments on this kind of loan, the remaining balance in your debt would be taken out against the value of your property. In simple terms, your house could repossessed should this be the case. If you need larger sums of money, secured loans are a better option but it would also be harder to get approved if you have a bad credit score.
On the other hand, if you want to get an easier loan even if you have a bad credit score, you can opt for unsecured loans. Do not be taken aback by its name, it only means that there would not be any kind of collateral secured against your loan. Any of your assets or properties would not be touched should you fail to pay off the loan. This kind of loan is perfect for small amounts that would be able to help you for emergencies and such. Getting approved for an unsecured loan would heavily rely on your credit score, but even with a bad credit score, a guarantor with a good credit score would be able to ease up the application process for you.
Guarantor Loan Applicants
If you have a bad credit score because of previous monetary issues, problems or mistakes, or if you have simply not built up your credit score yet, then it might be difficult for you to get approved for a loan. But that does not mean that it is impossible. With guarantors who have good credit scores, you would be able to apply for a loan and get approved instantly. This is someone who will be your co-signatory for the loan and would be able to support you should you be unable to pay off your monthly repayments on the loan. The great thing about this is that even if you have a guarantor as the basis for your loan, as long as you would be able to pay the monthly payments due, you would also be able to improve your credit score in the process. So the next time around, you may apply for a loan of your own without having to go through a guarantor, or you could also help a friend in need by being their guarantor on their application.
Being Smart About Loan Application
With these types of loans, you could use your loan for any legal way. It is not specifically targeted like other loans such as a home loan or a car loan. As long as it is legal, you can use the money to help you in your day to day. Some financial institutions would take advantage of your bad credit score when you apply for a loan and give you high interest rates with a payment scheme that is hard to keep up with. You have to smart about where to get an unsecured bad credit loan that would allow you to spread your monthly repayments over a period where you are most comfortable in paying off. This way, not only will it lessen the burden of the commitment to pay the loan immediately, but it would also make the monthly values more affordable and easier to pay off. Your monthly pay offs should also remain the same throughout the duration of your loan even in the next let us say, three or five years down the road. That way, you would not have to scramble so hard to get the monthly payments from.