At some point, we need to borrow money for various purposes. Whether it’s for an emergency, medical needs, leisure, or business financing, we need loans to kickstart our goals in life. However, not everyone has the opportunity to get these loans from traditional banks, especially those dealing with low credit scores.
Hence, we have put together a list of alternative lending programs that accept low credit owners. Learn them all here and get your next loan approved in no time!
Alternative lending is an umbrella term of non-traditional loan programs usually not offered in brick and mortar financial institutions. A lot of these programs are offered in private companies, auto shops, and investors.
Alternative lending does not always base its approval on a borrower’s credit score, unlike traditional lending programs. Some may look at it for reference, but they mainly check for your capacity to pay using your recent paychecks, demographic information, and disclosed assets.
Alternative lending has become a trend for small business owners and borrowers with bad credit scores. This lending option has become essential because it’s easy to access and comes with various repayment terms.
Alternative lending comes with two types of loans – unsecured and secured loans. While this characteristic also exists in traditional loans, the difference comes with its payment terms and requirements.
Secured loans are commonly referred to as collateral loans. Collateral loans are given to borrowers who can offer a material asset, such as a house, vehicle, or equipment, that matches the requested loan amount. Secured loans typically have flexible payment terms. However, filing for default or having too many penalties may result in a repossession, where the lender will take the collateral as payment for the unpaid loan.
On the other hand, unsecured loans are standard loan programs that most borrowers opt for, such as personal and payday loans. These loans require no collateral but come with a detailed requirement of payslip records or financial transactions.
Some alternative financial groups offer unsecured loans without checking your credit standing in exchange for slightly higher interest rates and penalty fees.
To check which loan program suits you, take a look at some of their definitions.
Auto loans are collateral loan programs often offered in most auto shops. They offer big loans to borrowers with the amount depending on the market price of the collateral. In this case, the borrower’s vehicle.
Lenders on auto loans are more lenient and sometimes open to renegotiating the payment terms. But be reminded that they reserve the right of collateral repossession and will use it against you should you garner enough penalties or drop down to default.
Hence, you have to be extra careful when choosing an auto dealer, as there are strict guidelines about loans in some states. Moreover, there are shady dealers who’ll take advantage of low credit borrowers.
If an auto loan helps solve your financial need, make sure they are regulated by the state government and provide papers proving its legitimacy.
Payday loans are unsecured loans that you need to pay once your payday comes, hence its name. These loans are short-term loan agreements often associated with high interest rates, allowing for faster approval that is suited for quick financial fixes.
As mentioned, these loans will be due on the day you get your paycheck, which is sometime between two to four weeks. You’re obligated to pay the loan by this time, or else the lender can debit your bank account or cash your check.
Since it offers such a high interest rate, regulations on payday loans are being made across regions, and some states are banning it altogether. If a legal lender has payday loans to offer or if you need such a loan, make sure to check for the terms and conditions of the program, amount limit, and calculated deductions before sealing the deal.
Online Lending Platforms
Online lending platforms take another helpful alternative of providing online loans for bad credit owners. These platforms emphasize convenience and instant approvals without the hassle of thorough background checks.
Online lending platforms feature faster loan approval than most banks, and they only require some identification. You can get your first loan transferred around one to two business days.
Online lending platforms rely on the trust system to better cater to their clients. At the same time, failure to pay on time will automatically ban the borrower from service. Meanwhile, responsible clients get access to higher loans, better payment terms, and additional perks and discounts from various brands as a reward.
On a Final Note
Loans are often essential and a lifesaver in financial emergencies. The alternative loans mentioned above are fitted to cater to clients with different issues or needs that most banks can’t offer. Whatever your loan program is, make sure to maintain the financial discipline to ensure all dues are met and become a responsible borrower overall.