Top Loan Options to Consider If You Have Poor Credit

Poor credit makes getting a loan difficult and costly. But you can find yourself in a situation that requires cash on hand to pay for expenses such as credit card debt consolidation, medical bill, completing a home repair or purchasing a car. The process of acquiring a bad credit loan in Houston may not be easy. But if you manage to get one, you can rebuild your credit and be in a position to qualify for better terms and interest rates the next time you apply for a loan.

Lenders look at credit differently compared to how FICO defines poor credit. They will perform a credit check and use your credit rating to determine whether it’s risky or safe to lend you their money. Before applying for a bad credit loan, you should check your credit score first to get a clear idea of how much you anticipate to get from the lender. If used wisely, bad credit loans can boost your credit profile.

Here are loan options to consider with bad credit:

1. Secured credit cards

Secured credit cards have a requirement that you deposit an amount to the card issuer to help determine your credit limit. Having a secured credit card can help in improving your credit and increase your chances of low-interest rates on loans. You should use the card responsibly by making full payments on time for a few months. If your credit card issuer reports to the major credit bureaus, your good credit history will be reflected on your credit reports.

2. Credit-builder loans

Credit builder loans are designed specifically for people who are building credit. The loan products can be sourced from credit unions and other financial institutions such as online lenders. A credit builder loan helps you to prepay your loan. The lender will hold the funds in a savings account that you will not access until you complete all loan payments. The loan will be paid off just like any other loan with loan terms of between six to 24 months. During this time, your lender will be reporting your credit activity to the credit bureaus. Ensure to make full monthly payments on time to establish a positive credit history and boost your credit gradually.

3. Personal loans

Personal loans are the best alternatives for consumers with poor credit. They can be used for different purposes such as consolidating credit card debts, making major purchases, or for covering unexpected costs. These bad credit loans in Houston may not work similarly as credit builder loans, but if properly utilized, with good credit behavior, they can help to rebuild your credit. You have to be disciplined in remitting your payments according to the loan agreement.

Poor credit attracts high-interest rates on personal loans. But the credit benefit of this loan is this loan is the way it helps you diversify your credit mix. Ten percent of FICO credit scores is accounted for by your credit mix. And paying off the loan can significantly help in lowering your debt-to-income-ratio. Your existing debts consist of 30% of your credit score and paying them off using less credit can boost the scores over time. On the other hand, your payment history comprises 35% of your total FICO credit rating.

The following types of bad credit loans in Houston require that the borrower be cautious when deciding to apply. Some of these loans can hinder your efforts of repairing and rebuilding your credit. They are high-cost loans that provide fast cash when in need, but also bring in the possibility of you incurring long-term debt. As you know, adding to your debt causes more harm than good to your credit, and things can worsen if you default on loan payments.

These loans include:

Payday loans

Payday loans offer a consumer a loan term of between two and four weeks from the date of acquisition. They are often small amounts of up to $500, but the interest and fees that come with this loan are wanting. Interest rates on some of the payday loans can equate to nearly 400% annual percentage rate. These bad credit loans in Houston are available without credit checks, with fast application and processing periods.

You can borrow payday loans when you have an emergency case, and you’ll have your funds within minutes or a few hours after application. They are ideal for salaried employees. In case you default on payment, get ready to pay extra interest on the loan and service fees for rolling it over. However, to avoid this, you can shop for a lender who understands your situation and will not charge you excessive fees.

Title loans

Title loans are also high-cost loans for small amounts of money. When you accept the bad credit loans in Houston, you agree to use either your car title as collateral. The loan amount is payable after 30 days. Failure to pay, the lender can seize your vehicle. It is better to read the fine print and understand the loan terms before signing up for the loan. Only take up a loan that you can afford and boost your credit.

4. Get a refund anticipation loan (RAL)

This type of loan is a good option if you have not been successful with the other methods and you are expecting a refund on your federal income tax. You can be granted a loan based on the refund anticipated once you contact the tax preparation firm for the refund anticipation loan. The firm uses your expected tax return as collateral for the loan. These loans have high interest rates and other fees. They are usually available in early January until April when taxes are due. If you file all your taxes through the e-file system, the process gets easier, but they’ll take a large portion of your refund.

5. Take a cash advance

Use your credit card to get a small loan from the bank. The loan will be added to your credit card bill. They will charge you high interest on the cash advance. You should pay back the loan by the next statement because if you fail, your interest will carry over to the next subsequent payments.

Final thoughts

Bad credit does not have to be permanent. You can improve your credit in so many ways, and if you have to take out bad credit loans in Houston, ensure to make on-time payments.

Also, keep your balances low and dispute the errors on your credit report. To further enhance your credit rating, ensure to practice good financial habits that will also make it less expensive to borrow money.

Want to talk to a credit repair specialist?

Are you looking for a mortgage or car loan but can’t access it due to a poor credit score? You’re not alone. At Alex Miller Credit Repair, we’ve helped many people like you get their credit score back on track and streamline their financial lives. Just email or call us at 877-503-9737 for a free consultation with our experts.