Did you know that it’s possible to get a loan even if you have bad credit? Technology has made it possible for self-employed professionals to qualify for a loan even with a poor credit rating. In this article, we’ll identify different places to get loans for self-employed with bad credit.
Where to Get a Loan If You Have Bad Credit
Here are some of the places you could apply for a loan:
- Loan Aggregators
Loan aggregators aren’t lending companies, so they don’t lend you the money per se; instead, they’re often online platforms where several lenders participate. Here’s how it works: You can apply for a self-employed loan through a loan aggregator by filling out a loan request. Lenders within the loan aggregator platform can make offers depending on your credit profile. This is an excellent option for borrowers with bad credit because they consider all credit levels.
- Personal Loan Lenders
Taking out a personal loan from personal loan lenders is another financing option for self-employed professionals. These lenders often have flexible credit score requirements, so you’ll likely qualify for a loan even if you have bad credit.
- Peer-to-Peer (P2P) Lenders
Peer-to-peer lending companies often charge high-interest rates, some going as high as 36%. However, they do offer financing options with fixed rates and no collateral. P2P lending works differently from most financing. Instead of borrowing from a financial institution, you’re borrowing from an individual or a group of people who are willing to loan money. You can typically use the funds for almost any purpose, including starting a business, debt consolidation, etc.
Types of Loans You Can Apply for with Bad Credit
People with bad credit have several financing options. Here are some of them:
- Secured and Unsecured Personal Loans
Most personal loans can be structured as secured or unsecured. Secured loans ask for collateral, such as cars or properties, to secure the loan. These loans offer more favorable terms, rates, and loan limits because the collateral incentivizes borrowers to repay the loan on time. Otherwise, the lender has the right to repossess the collateral you pledged. Since your assets primarily secure the loan, it’s easier for bad-credit borrowers to qualify for a secured loan compared to an unsecured one.
Unsecured loans don’t require collateral, so the terms, rates, and loan amount depend on your creditworthiness. It may be harder to qualify for an unsecured loan if you have bad credit. If you do qualify, you’ll likely receive higher interest rates compared to secured loans. The upside is you won’t risk losing your assets in case you default on the loan.
Both secured and unsecured loans are great financing options for obtaining the funds you need. However, be sure to weigh the pros and cons before applying.
- Home Equity Loans
A home equity loan is a financing program that uses your home as collateral. Lending companies give you a lump sum upfront, and you’ll need to pay that back in fixed monthly payments. If you fail to make your payments, the lending company has the right to repossess your home. But since this is a secured loan, it’s easier for borrowers with bad credit to qualify.
This type of loan is best for large purchases, such as debt consolidation or renovation projects. When considering home equity loans, be sure to recognize the risk of losing your home.
- Payday Loans
Payday loans are short-term loans with low loan amounts, typically around $1000 or less. Payday lenders charge high fees in exchange for instant money and borrowers need to pay it back by their next paycheck, hence the name payday loans. If you aren’t careful, payday loans can get you into a vicious cycle of debt because of their high-interest rates.
Borrowers with bad credit can easily qualify for payday loans since lenders rarely run credit checks on their clients. However, the total cost of the loan can get extremely high, so it’s important to weigh your options. Some payday lenders can be predatory. Be sure to do your research and compare different payday lenders before signing up.
Final Thoughts
Ideally, borrowers should improve their credit rating before applying for financing. But most of the time, the need for extra cash happens on short notice. This means you’ll need to get a loan regardless of your credit rating. Hopefully, the tips mentioned above can give you an idea of where to get a bad credit loan.
