When credit scores drop, many lenders close their doors to you. This is added misery to something that might not be in your control. With limited options for borrowing, it becomes imperative to boost credit scores as quickly as possible.
There are a number of ways in which an individual can try to increase their scores. You can start with clearing out any bad debts that are spoiling your reputation, identify alternate income sources if you’ve run into financial trouble and seek help from a professional financial counselor. However, these options take time, and what if you’re short on that? Well, you can opt for secured loans available on bad credit.
What is a secured loan?
Small and personal loans are generally not backed by a collateral or underlying asset. They only take your ability to repay the loan into account and lend you the money accordingly. However, when a person has credit ratings that fall below the fair mark of 630 points, getting these loans is tough and generally very expensive. A secured loan offers an alternative by keeping an asset as security and providing a loan on the basis of it.
The assets that can be placed as collateral include an automobile that you own, the equity in your house, or jewelry that might be in your possession. These assets are then examined by the financial institution to determine the amount that they will lend out to you. In times when you have bad credit scores, financial experts state secured loans as the best form of financial borrowing amongst all other options.
Where to find secured personal loans?
There are a number of institutions that offer secured personal loans. They include but are not limited to:
- Banks: Financial institutions offer secured loans but they assess the credit rating of the customer. A person with bad scores will still be put in a high-risk bracket for personal loans,
- Community credit unions: Preferably an institution that is associated with your employer or community will be willing to offer softer terms on secured loans for poor credit. They might look past the credit score and still offer loans for emergency needs,
- Online lenders: Also known as peer to peer lending, this type of borrowing is done easily and efficiently through online sources. The process for applications is fast and simple. Online lending makes it simple for an individual to obtain money for an obligation that has to be paid at the earliest and doesn’t provide time to improve the credit score.
Secured personal loans are the go-to option for those with poor credit, but it is important that they should have rectified the issues that caused their rating to drop in the first place. In case there has been no improvement in the financial situation, it can become even more challenging to acquire an affordable loan for your requirements.