Those looking for a personal loan for bad credit have a few options to explore. Three of the most popular are credit cards, home equity loans, and personal loans for bad credit. The funds received can be used to buy jewelry or upgrade a shop for many reasons. Which type is most suitable depends on the intended use and personal financial situation.
Here’s a little about each type to help everyone make an informed decision when choosing a bad credit personal loan.
You can get a personal loan from most banks. As mentioned, they can be used for almost anything and are based on the ability to provide proof of income and assets. These assets must be worth the amount that the person is borrowing. It is a quick application process when these things are in place and taken care of, and the applicant will know within a few days if they are approved.
The main disadvantage is that interest rates are usually high, averaging 12%. The repayment period varies, but is usually no more than two years. It is for this reason that it is not recommended to finance very large amounts in this way, as many find it difficult to repay them in two years.
Credit cards are another option when consumers are looking for some type of personal loan for bad credit. They are tantamount to securing a loan, as they are also repaid later. The cards are easy to use as they are accepted as payment for almost everything.
They are easy to apply for and can be as high as $10,000. The application will be reviewed quickly, usually no longer than two weeks. There are also those that are verified over the phone and approved in just a few minutes. It all depends on the card company. Conditions vary widely, so it’s important for anyone applying to really look at the fine print.
There are many things to consider in this print. Topping the list are interest rates, annual fees, overage fees, and more. It has been proven that credit cards accumulate debt faster than other types of credit because they are so available and easy to get from any retailer. For someone seeking a personal loan because of bad credit, it can be an unwise decision and may end up hurting rather than repairing credit.
Home Equity Line
The home equity line of credit is a wise decision. It allows homeowners to borrow the value of their home. It’s easy to calculate how much someone can get. All they have to do is compare the market value of the home to what is still owed on it. Many choose not to if they plan to sell in the near future. However, if you are planning to stay there for a longer period of time, this is a great option.
Like other bad credit personal loans, the money can be used for anything they want. Often they are used for home improvement, debt consolidation and much more. The interest rates are low to average and can potentially be repaid over a period of up to 20 years. There aren’t many downsides to a home equity loan; in some cases the interest is a tax deduction. That’s hard to beat!
The main disadvantage of this type of personal loan for bad credit is that the person who takes it can sometimes find themselves in a worse situation in relation to their mortgage. If there are two sources of income and they are well above the monthly bills to be paid, the person can probably repay the loan with no problems. Otherwise it cannot bring any benefit. Above all, the consumer ends up losing his job or is suddenly unable to work. Also, prices sometimes fluctuate.