Borrowing on Bad Credit
If you have bad credit and think you could never get a loan, well, think again.
While it’s true it may be harder, it nevertheless possible to borrow even with that bad credit rating. There are, for example, lending institutions that specialize in what are called “bad credit loans”. These, admittedly sub-prime lenders, will lend you money regardless of your less-than-perfect credit history.
Truth is, there are a number of ways to get around bad credit and get that loan you need. Let’s explore a few of the options.
A title loan, or car title loan, is simply money borrowed against the value of your automobile, assuming you own one. This is a secured loan in which the borrower offers his or her vehicle as collateral. Such loans will allow you to borrow as much as the vehicle is worth and, provided you own the vehicle outright, your loan application needn’t require a credit check. Application for a title loan is, normally, quick and easy. The lender will place a lien on the car title until such time as the loan is fully repaid. Failure to pay, of course, will result in the lender taking possession of the vehicle. Car title loans are typically short-term loans and carry a higher than average interest rate. If you do get one of these, you are well advised to repay the loan as quickly as possible.
Home Equity Loans
A homeowner may take out a loan against any equity they may have in their property. In this case, the equity serves as collateral on the loan but, different from a car title loan, the home equity loan may be a lump sum or line of credit loan. In the case of a home equity line of credit loan (HELOC), the borrower is able to use this line of credit to draw from during the period designated as the loan’s “draw period”. Repaying the loan requires payment of any money drawn plus the interest on that money. Full payment on the loan is due at the end of the draw period which may be anywhere from five to twenty-five years. Banks typically limit the amount of a home equity loan to, say, 80 or 90% of the equity.
Home equity loans are both tax deductible and low interest but defaulting on a home equity loan can put your ownership at risk. If you do choose to go with a home equity line of credit, use it judiciously and, whatever you do, don’t default.