Where to Borrow Money When the Banks Won’t Loan – How to Borrow Money With Bad Credit

Fortunately banks are by no means the only institutions which lend money to people. If a bank will not let you borrow money, the chances are that you have a credit rating which is less than perfect. While this can be a problem for a lot of lenders, there are plenty of others who specialise in people with bad credit.

A poor credit rating does send a signal to lenders that you are going to be a higher risk than someone without your credit problems, so the terms of bad credit borrowing can often be adjusted to compensate for this. What that means is that if a lender thinks they are less likely to get all their money back by lending to people with a history of credit problems, they are probably going to charge a higher interest rate to make up for their increased losses.

However, there are other types of borrowing where a bad credit rating is far less of an issue anyway. The main one being secured loans, where the money you borrow is secured against something you own, usually your house, but sometimes a car. What this means is that the loan is legally tied into the ownership of your home, so if you were to default on the loan and not pay it back, the lender could have your house sold to get their money. Because they have this ultimate safety net to fall back on, they are much more willing to overlook bad credit ratings and lend much higher amounts of money.

The other type of lending which often does not rely on a credit report is for very short term loans for small amounts of cash. These are referred to as payday or cash advance loans. These are always for relatively small amounts and usually only for a period of weeks, or months at the most. The reason credit reports matter less is that the lender is unlikely to be lending you any more money than you will be getting in your next pay packet. So provided you prove that you have a job and will be getting paid at the end of the month, they do not usually worry about your credit rating.

You need to be careful if you are considering either of these types of borrowing. Secured loans put your home at risk, so for fairly obvious reasons you need to consider these carefully and be sure that you are going to be able to keep up with repayments. Knowing that they have your home to cover the debt, some less scrupulous companies may not be that careful about assessing your ability to repay the loan, and not very understanding if you do get into difficulties. You should therefore be very careful when you are selecting a company to use for such a serious undertaking.

Payday loans are for small amounts of money, but the interest charges are very high if you use the loans for longer periods than are intended. Like secured loans, this form of borrowing is a little open to abuse by less responsible lenders, who will be only to happy to slap outrageous penalty charges on you if you do not pay the loan back on time. Take care to seek recommendations on well established and reputable companies, and always get quotes from more than one.

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