When it comes to loans, you have two main choices. Unsecured and secured loans.
Unsecured Loan Choices
With an unsecured loan, the lender has no claim on any of your property. For small dollar loans, unsecured loans will be the easiest way to go.
#1 Pick: Installment Loans
An installment loan has a number of advantages over a payday loan. You can get more money, will pay a lower interest rate in most cases and you will have longer to pay the loan back. This makes it the best pick for those needing small dollar amounts with bad credit.
If you would like a quote for an installment loan, we can help. We can give you access to one of the largest lending networks on the internet. It takes just a few minutes to fill out the quote form and you are under absolutely no obligation.
#2 Pick: Friends & Family
The second best alternative for an unsecured loan is borrowing from friends and family. A loan from someone you know will usually be interest free and they will probably give you a decent amount of time to pay it back. Nothing beats a free loan.
The downside to borrowing from friends and family is dealing with the emotion that comes with the loans. People can easily start to feel like you are taking advantage of them. Many a friendship has been lost due to money issues. Because of this fact alone, you need to think carefully before taking out this kind of a loan.
#3 Pick: Payday Loan
Payday loans can be a bit problematic, which is why they are at the end of the list. They come with fees based on the amount borrowed and very short loan terms. Because of the short loan terms, the effective interest rate is very high. Payday loans are also heavily regulated and not available in all states.
Still, if you can not get approved for another type of loan because of bad credit, they might be a choice you need to look at. You can easily pick up a quick $500 payday loan no matter what your credit looks like, in most cases.
Secured Loan Choices
A secured loan is one where the lender has a lien on property to back the loan. These loans get a bit more complicated and they might not be worth the trouble for small dollar amounts but, let’s take a look.
#1 Pick: Pawn Loans
Pawn loans are good for amounts under $200. They are secured loans where you bring in an item of value to a pawn shop. They appraise it and then give you a portion of the values as a loan. Bring the money back with the fees and interest and you get your property back.
These secured loans are best for low dollar amounts because the lender will only give you a portion of the value of an item as a loan. If something has a used value of $400, they might only give you $150.
Pawn loans can be easily obtained by those with bad credit but, like payday loans, they come with high fees and interest. Lenders are regulated but are often allowed to charge you contract fees, storage fees and interest on the loan. It can add up.
Some common things to pawn are electronics, sporting goods like mountain bikes and jewelry.
#2 Pick: Title Loans
Title loans are a possibility for you if you have a car or truck that is free and clear of liens, with the title in hand. With a title loan, you take a loan against the value of your vehicle.
Title loans are not very good loans in most cases but they are easy to get with bad credit. The problem is that they still come with high interest and fees and if you can not pay them off, there is a big catch. The lender can take your vehicle and sell it. Many people have lost their vehicles in this way.
If this is the route that you want to take, you should take the time to look at a legitimate lender who will give you slightly better terms. A cash-out refinance might be the better way for you to go. With this scenario, you can get money out of your vehicle even if it is not paid off, all that you need is equity. The lender will still have a lien on your vehicle but the terms will probably be better than that of a title loan company.
Improving Your Bad Credit
Hopefully, one of the above options will help you get through your immediate need. Once the problem has been handled, you should next turn your attention to fixing your credit. There is no secret to having good credit. Credit scores are, in fact, a formula. To have good credit, you need to pay your bills on time and keep your balances low.
Paying Bills On Time
The biggest portion of your credit is from on time bill payments. Even a single 30 day late payment can have a huge effect on your credit score. Luckily, you can improve your credit by simply paying your bills on time. In just six months time, you can start seeing some positive changes to your score from on time payments .
Keeping Balances Low
Lenders like to see that you are not abusing credit and that you have a lot of it available to you. It is ideal for your credit card balances to be at or below 30% of your limit. You can reach that goal by paying the balances down or by asking your credit card company for a credit line increase.