Luckily, more online lenders are providing personal loans for all types of credit scores. The catch is that these cash advance are more expensive and you are only allowed to borrow up to $2000 unless you have a high monthly income. With the credit scoring system, your borrowing cost is directly based on your credit score - people with low 500 credit score may need to pay 30% loan rates per month. So, if you like to have cheap low rate loans, you need to maintain a high credit score.
Person-to-Person Lenders for Installment LoansThere is a new type of unsecured installment loans up to $20,000 from peer-to-peer lenders, such as Prosper.com, Zopa.com and Lending Club. These two websites are not the actual lenders, they act as the intermediary platform or middle man for borrowers and investors. the latter are ordinary folks who wanted to get higher returns on their money by giving out private unsecured loans. When you apply for an online peer-to-peer loan, one or more investors may pool together their money to make the loan. This helps to offset the set of default, and hence the loan rates are cheaper even if you have bad credit.
Like other types of private loans, you can use the money for any purpose but make sure you use it in a productive manner. However, you cannot get a Prosper or Lending Club loan with very bad credit. For example, you need at least 660 FICO credit to qualify for a Lending Club loan and 640 for Prosper.com loans. The maximum you can borrow from Lending Club is $35,000 and $25,000 from Prosper.com. For larger loans, more than 1 lender is required to invest and if there are insufficient investors, you may not be able to secure the person-to-person loan at all.
Home Equity Installment Loans From BanksBanks are always willing to give home equity loans for bad credit because the risk of default among borrowers are very low, according to past statistics. Even so, the banks do not really lose out when borrowers are not able to pay back, sine they can foreclose their property and homes used as loan collateral. If you need to borrow $20,000 for a few years, home equity loans offer very cheap rates at 5% to 7% APR. Since these are large loans, you should compare bank quotes for the best rates and deals.
The amount of home equity you have depending on the difference in the current value of your home and the outstanding balance on the mortgage. For example, if your home is worth $300,000 and you have a $100,000 mortgage balance, the level of equity is $200,000 of equity in your home or a 33% Loan-to-Value (LTV). This is sufficient to qualify for a home equity loan easily.
Homeowner loans are secured using your home equity, the more the better. With homeowners with bad credit scores, banks will require you to have higher equity or LTV in to get approved. This is to offset the increased risk of making loans to borrowers with bad credit, so they will restrict the maximum home equity loan you can take.
While home equity loan rates are very cheap, the consequences of not paying on time can be very grave. It can lead to home repossession by the bank. You need to consider whether it is worth the risk of losing your home on a $20,000 loan.