Title Loans and Other Options For Borrowers With Bad Credit

If you have a bad or no credit history, you’ll know that getting a loan is not going to be easy. But what do you do if you have an emergency and need a quick cash? As a borrower with a low FICO score, your history of late payments means that you should always expect to pay more in interest for any money you borrow.

But you do have several bad-credit loan options available to you, each one with its share of advantages and disadvantages. When you need a cash loan for emergencies, it’s up to you to decide which of these is best suited for your needs. The three main bad-credit loan types include:

1. Payday advances

2. Unsecured personal loans

3. Secured loans

How to Understand Bad Credit Debt Options

1. Payday advances:

Payday advances can work only for temporary borrowers who have the ability to repay the debt in their next pay period. With payday advances, a post-dated check is held by the lender for the borrowed amount plus a lending fee.

To cover the debt owed, the check is then deposited during the next pay period. Because the debt must be paid off immediately, these are only recommended for emergency use if you have a steady income or a secure job to rely on.

2. Unsecured personal debt:

Very high interest rates, high fees and penalties and rigid terms are the general features of unsecured personal loans for people with bad credit. Because you are not offering anything as collateral, these loans are very risky for the lender. Over the life of these agreements, you’ll often end up paying more in interest than was borrowed in the beginning.

3. Secured debt:

Secured loans such as vehicle collateral loans offer borrowers with low ratings the opportunity to get cash fast with relatively low interest rates, compared to unsecured credit. The lender is not taking as large a risk and the borrower can get a better deal because the vehicle title serves as collateral.

Title Loans Can Help Improve Credit Scores

Title loans are secured, short-term loans that can be repaid in as little as 30 days or up to 24 months. Lenders typically offer 25 to 50 percent of the wholesale price of your vehicle and keep the car title as collateral. Although they charge lower rates of interest than unsecured debt instruments, they also bring the risk of losing your vehicle should you default on loan payments.

In most states, title loans must be repaid on time and in accordance with the agreement. If this happens it can be a positive mark on your credit score because it demonstrates the ability to act responsibly with money. Since credit bureaus give greater credence to recent activity than past history of repaying debts, the act of repaying a title loan diligently can boost a low FICO score.

As long as you use the cash obtained from the title loan wisely, you can benefit must more from this option than other bad credit borrowing options. Make sure you choose a reputed lender that offers competitive interest rates and flexible payment terms. Always read the terms of your loan agreement carefully and be aware of your rights as a consumer to avoid disreputable lenders.