If you have a poor credit score, you may think loans are out of reach. But luckily, there are plenty of lenders that offer secured and unsecured loans for poor credit. By understanding the differences between these types of loans, you’ll be able to decide which option is right for you, learn how to get a loan with poor credit, and start covering expenses quickly. Let’s dive deeper into secured vs. unsecured loans for poor credit and how you can get a loan that meets your financial needs.
Secured loans for borrowers with poor credit
A secured loan is any loan that uses an asset of value you own as collateral. Some types of secured loans are mortgages, title loans, pawn shop loans, and home equity lines of credit. These loans often come with lower interest rates than unsecured loans, and borrowers may be able to get larger loan amounts.
Since you’re providing collateral like your house or car, this makes the loan less risky to the lender. So, you often don’t need good credit to get a secured loan. Just keep in mind that the lender can repossess your collateral if you fail to repay the loan, so make sure you have a good repayment plan before applying.
Unsecured loans for borrowers with poor credit
Unsecured loans are loans that don’t require you to provide collateral to secure the loan. Lines of credit, installment loans, cash advances, and student loans are all types of unsecured loans.
Many lenders offering unsecured loans will consider your credit score when deciding whether to approve you. But luckily, there are many with more lenient credit score requirements that will assess additional factors, like income, employment history, and current debts. This means you can still get approved for an unsecured loan with poor or fair credit.
How to decide which loan is right for you
To figure out whether a secured or unsecured loan is right for you, you should consider your financial needs and preferences. If you’re willing to use collateral and want a larger loan amount, then a secured loan may make the most sense. But if you don’t own an item of value or don’t want to risk losing one, you may want to consider an unsecured loan instead. Whichever option you choose, make sure you can afford to pay back the loan to avoid paying additional interest and fees.
The bottom line
Having poor credit may seem like you don’t have many loan options, but not to worry. You may still be able to get approved for a secured or unsecured loan for poor credit. Do some research online to compare your options and consider your financial situation. If you find the right loan, you can get the funding you need quickly that may set you up for a more stable and secure financial future.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.