Short term financial hardships are usually unavoidable for blue collar people and even some on the lower end of the middle class. But what can make them harder is when you have bad credit and have few options for lending you can qualify for. Even though bad credit and income that’s unsteady may eliminate you from using more traditional personal loans, there are personal loans that alternative lenders offer that aren’t as difficult to qualify for and that are available even for bad credit applicants.
Using Payday Loans
One of the most common forms of alternative loans are payday loans which have that name because they are meant to be repaid on your payday. When you take out payday loans, the lender has access to your checking account through automatic withdrawal which deducts the amount owed on the date due and pays it off in one lump sum. Usually when you apply for payday loans you just need to prove you have enough monthly income to cover the payments and have a checking account in good standing. You don’t have to state what you’re going to use your payday loan funds for, but be aware that there can be significant costs to using them.
A drawback to payday loans is that the annual percentage rate you pay in interest can be quite high. Sometimes lenders misrepresented this amount by only stating the monthly interest on their loan terms and not the actual full interest percentage rate APR, though some states have now implemented laws that require the actual APR to be listed and include borrowing warnings. But Interest rates aren’t the only high payments you can run into. If a withdrawal attempt is made from your checking account and there is non sufficient funds, you could be hit with high fees both from your bank and the lender. Payday loans can meet some emergency expenses if you can pay them back very quickly, but they aren’t for everyone.
Using Title Loans
Another loan used for short term needs is an title loan which is similar to a payday loan, but in some cases you can borrow more with one and usually have more time to pay. But like payday loans, you can end up paying high interest and getting stuck in bad long-term debt if you aren’t careful with how you use title loans. And unlike payday loans where you may only be at risk of having your bank account closed and dealing with collection calls if you don’t pay up right away, defaulting on a title loan puts your vehicle at risk because the lender has your title.
Using Installment Loans
Another loan that’s now offered by some payday lenders but also included in other states where payday loans and title loans are not permitted is an installment loan. This is a broad kind of loan by definition, but the installment loan referred to here is for short term financial needs, and a study done by the Pew Charitable Trusts shows that it’s gaining popularity over regular payday loans. That’s because while it’s not meant to stretch out, it’s structured in smaller payments that don’t eat into the borrower’s income as much, and they can help you avoid dangerous debt if you plan your payments right, and using one likely won’t affect your credit score.
Consider Credit Counseling
If debt is a struggle for you, sometimes a reputable credit counseling service is a good option to help you get through your struggles. You need to do your research and find one with a helpful customer service team that has proven results. If you decide to go this route, choose a credit counseling service that emphasizes your needs more so than a pay for program.