Borrowing Options for People with Bad Credit

Good credit is just as valuable as having a large sum of cash. When your credit is good, you can borrow just about any amount of money to cover the costs of big-ticket items like a car, house, business startup, and more. As beneficial as good credit can be, it only takes a few mistakes for it to turn bad. Then, getting the things you want becomes more of a challenge. While the solution is obviously to improve your credit, knowing where to turn in the interim is ideal.

Short-Term Loans

If your credit is fair or poor, getting a traditional bank loan is out of the question. There are alternative loans for bad credit holders known as installment or short-term loans. These unsecured personal loans are provided to those who meet minimal criteria including verifiable income and a good standing checking or savings account. They can provide you with a lump sum of cash that must be repaid in increments over a short time period (usually 14-30 days).

Life Insurance Loans

Do you have a life insurance policy that you’ve been paying on for several years? Depending on the type of policy you purchased, you may be able to borrow on the policy. Though the amount and interest rates will vary based on your creditworthiness, you are usually provided with a bit more time to repay the loan. What should be strongly considered here, is if you should pass prior to repaying the loan, your beneficiaries won’t receive the full loan amount upon your death.

Retirement Account Loans

Your pension, 401K, or IRA accounts are savings accounts that have been set up for your retirement. Whether through your employer or not, if you’ve been contributing for several years, you may be entitled to borrow a percentage of your total account balance. With minimal eligibility requirements, you can get approved. With borrowing from a retirement account, however, it is to be remembered that if you do not repay it in time, or should you become fired and do not repay it, you will be taxed as if you withdrew the funds early.

Home Equity Loans

They don’t call your home an asset without reason. If you have a mortgage and have been paying regularly over several years, you’ve built up equity that can be borrowed on. Home equity loans don’t require as much as a personal loan considering your home is considered the collateral. Repayments are typically added to your mortgage payment. Should the loan not be repaid, however, the property can get foreclosed on.

There are options for those who don’t have the credit that will get them traditional bank loans. However, they should all be considered with care. Prior to applying for any of the above-mentioned lending products be sure to weigh the pros and cons, check your budget to ensure you can afford it, and more importantly proactively repay the balance in full. If, for some reason, you can’t repay as agreed, be sure to reach out to the lender to avoid digging a deeper financial hole for yourself.