About Loans for People With Bad Credit
Though loan options for people with bad credit are fewer than those for people with good payment histories, there are ways for people with credit problems to get loans. Most bad credit loans require some kind of down payment and/or collateral, which reduces the lender's risk in the event the payments are not made as promised.
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Proof of Income
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Proof of income, through pay stubs and/or tax returns, is especially important when a person with bad credit applies for a loan.
Stable Employment
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When it comes to bad credit loans, those who have been at one job for at least six months to a year are favored more so than people with a newer job.
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Mortgages
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Mortgage loans are available to people with bad credit, but a down payment of five to 20 percent is usually required. The house serves as collateral for the loan.
Auto Loans
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Many banks will give car loans to people with bad credit, but often require at least $1,000 be given as a down payment.
Secured Loans
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Secured personal loans are the most likely option for those with bad credit who do not want to pay interest rates in excess of 30 percent. These loans give cash but are backed with collateral such as stocks, savings accounts or home equity.
Unsecured Loans
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Unsecured loans, which give cash without collateral, are sometimes available to bad credit borrowers from companies such as American General (see Resources). Payday loans are considered a last resort option due to interest rates that can exceed 300 percent.
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