Best bad credit loans in February 2022 – Forbes Advisor

When it comes to personal loans, there are two types you can apply for: secured and unsecured loans. However, if you are having trouble qualifying for a personal loan, consider other loans for bad credit.

Secured and unsecured bad credit personal loans

Traditional personal loans can be either secured or unsecured. Secured loans require you to provide something of value (also known as collateral) such as a loan. B. Your car, savings account, or home to secure (or collateralize) the loan. The lender can take back the collateral if you default on payments or default. This makes them less risky for a lender, which also means they tend to offer more favorable terms like lower interest rates and fewer qualification requirements.

Unsecured loans, on the other hand, are the more common of the two and do not require collateral. Since these loans do not require collateral and therefore pose a higher risk for lenders, they usually come with higher qualification requirements and higher interest rates. The loans on this list are all unsecured personal loans.

Student loans for bad credit

If you’re trying to meet higher education expenses, a student loan for bad credit is probably the direction you want to look. Although private student loans typically require good credit, borrowers with bad credit can take out government student loans that do not require a credit check. Federal loans also have the most flexible repayment terms, including waivers if you work in the government sector or choose specific repayment schedules.

Car loans for bad credit

A car loan is a secured loan that uses your car as collateral, meaning the lender can repossess your car if you default on payments or default.

Similar to personal loans, auto loan qualification requirements vary by lender and dealer. While we recommend a minimum credit score of 670 to get the best terms, you can still qualify for a lower-score car loan as long as you meet Debt-to-Income (DTI) requirements and make a larger down payment .

Payday loans for bad credit

Payday loans are short-term, small-dollar loans (usually up to $500) that you pay back as soon as you get your next paycheck, usually two to four weeks after you took out the loan. Many lenders do not require a credit check, which is often tempting for people with bad credit. However, don’t get your hopes up. Payday loans come with a lot of inherent risks and sky-high fees. Consider other alternatives first, like personal loans or borrowing money from friends and family.

Home equity loans & HELOCs for bad credit

If you have enough equity in your home — the current market value of your home minus your remaining mortgage balance — you may be able to get a home equity loan or line of credit (HELOC). Both allow you to underwrite against your house, meaning your house secures the transaction and the lender can repossess it if you don’t pay it back. However, home equity loans are paid out as lump sums, while HELOCs limit you to withdrawing money when needed.

But borrowers with bad credit are unlikely to qualify for these loans. Most traditional lenders require minimum scores between 600 and 620. There may be a specialty lender or credit union that makes an exception, but that’s not common. People with less than 600 points would have to turn to hard financiers like private investors or corporations, not a bank. Coin lenders, while more flexible, tend to be more expensive.

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