Credit score plays a big role in people’s borrowing options. Poor credit can make borrowing harder by lowering the borrower’s approval chances and making them deal with higher interest rates and low loan amounts. However, poor-credit borrowers are not shut out of the borrowing process. There are numerous options available even for people with low credit scores, including online loans for poor credit. This article will dive into some side effects of poor credit before covering a few options for borrowers with lower credit scores.
Poor credit side effects
Poor credit makes the loan shopping process harder through traditional lenders. Here are some side effects of a low credit score:
1. Lower approval chances
It can be harder to get approved for loans when a borrower has poor credit. Some lenders offer poor-credit loans, but borrowers may need to spend some extra time researching and comparing to find an option that works for their financial needs.
2. Higher interest rates
Lenders generally charge higher interest rates for borrowers with lower credit scores. This can cause loans and credit cards to cost a lot more money on interest, meaning borrowers will have to budget more for loan repayment.
3. Smaller loan amounts
Borrowers might not qualify for as large of a loan amount when they have a lower credit score. This means it might be harder to get the amount of money they need to borrow.
Options for poor-credit borrowers who need cash fast
Luckily, poor credit doesn’t have to keep borrowers from getting the cash they need. Here are some fast-cash loan options for borrowers with lower credit scores:
1. Online loans for poor credit
Some online lenders offer loans specifically for borrowers with poor credit. It’s easier to find these, too, since borrowers can use loan marketplaces to aggregate numerous loan quotes in minutes.
Some lenders, like those who offer installment loans and cash advances, may check credit but accept lower scores. They’ll consider additional factors when deciding whether to approve borrowers, like income and employment history. This means borrowers with poor, fair, or no credit can still get approved.
2. Pawn shop loans
Pawn shops let people borrow money using almost any valuable item they own as collateral. The pawnbroker appraises the item, then offers the borrower a loan amount and terms based on the item’s value. If the borrower accepts, they’ll exchange their item for the loan amount and a claim ticket. No credit checks are required.
The borrower will have 30 days to repay the loan, although they may be able to extend another 30 days for a fee. When they repay, they must also bring their claim ticket to claim the item. If the borrower can’t repay, the pawn shop takes possession of the item. But the borrower won’t face any other consequences, such as credit damage or collections.
3. Title loans
Title loans are secured loans that let borrowers use their car title as collateral if they own the vehicle outright. Since this loan is secured by collateral, borrowers don’t need a good credit score to get approved. The title lender will appraise the borrower’s vehicle and offer them 25% to 50% of its appraised value. If the borrower gets approved, they’ll get the funds that day and can drive their car during the repayment period.
The bottom line
Having poor credit might mean lower approval chances, higher interest rates, and smaller amounts on some loans. But a borrower’s credit score doesn’t have to bar them entirely from borrowing. Online loans for poor credit can be a great option for fast cash. Pawn shop loans work well if the borrower is willing to use a valuable item as collateral, whereas title loans can be a helpful tool if they own their car outright.
Regardless of loan type, shop around and compare offers. This can help borrowers save money on interest and find great terms, no matter their credit score.