There are numerous types of bad credit loans out there, each with its own advantages and disadvantages. The most common type of bad credit loan is the personal loan. In personal loans, the interest rates are usually fixed so you will know the exact amount you need to pay each month, allowing you to plan accordingly.
A similar bad credit loan is the guarantor loan. It works in a similar way with the personal loan. The only difference is that a third party is involved and will act as a guarantor for the loan. If you fail to keep up with the monthly payments, the guarantor will be held accountable for the loan and the lender will start pursuing him or her for the debt.
Another type of bad credit loan is secured loan. This type of loan requires you to put up an asset as collateral to the loan. If you are unable to settle the loan then the asset will be seized by the lender, which makes this type of loan a very risky venture. You should only apply for a secured loan if you are confident in your ability to repay the amount.
Examples of secured loans include homeowner loans, where you can borrow a larger amount of money compared to other loans but your home will be put up as collateral. Another example are logbook loans, where ownership of your car will be temporarily passed to the lender. You can still use the car in the meantime, however if you fail to meet the payments then the lender has the ability to take possession of the car.
Which Option Has The Lowest Interest Rates?
It does not matter which type of bad credit loan you apply for; all of them will have a high interest rate. As stated before, this is done in order to make it worthwhile for the lenders to loan to risky individuals with low credit scores. You will only know the exact interest rate after applying for the loan, which will definitely be higher than the one advertised by the lender.