Types of Loans Available for Those with Poor Credit

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Loans for bad credit are available for people whose credit may have been negatively affected for one reason or another. Any number of circumstances can cause unexpected financial hardships or setbacks that can hurt your credit rating. Fortunately, even with poor credit, if a financial emergency occurs, there are loan options for you to pursue.

No matter the credit circumstances of applicants, there are two types of loans available when people need to borrow money from a lender. These are secured loans and unsecured loans. Each type of loan is distinguished by the terms—one requires an asset as collateral, the other does not. Either loan may be paid back in installments or in one lump sum, with interest and, in some cases, fees.

Personal Loans
The most common type of loan to secure cash is called a personal loan. A personal loan is an installment loan from a financial institution where the borrower pays back the loan in installments each month or, depending on the terms, sometimes each week. They can be offered as secured or unsecured loans. Stipulation for either loan requires that the borrower has the means to make payments on the loan per the terms.

A secured personal loan requires some kind of asset for the lender to hold as collateral. Assets can range from a car, a motorcycle, a house, to any other type of property of value you are in possession of. The amount you borrow is secured by that asset. As the asset is held as collateral, and it can be taken by the lender if you fail to make payments, secured personal loans are usually offered with more favorable terms and lower interest rates because there is less risk to the lender.

Registration Loans
On the other hand, unsecured personal loans do not require any collateral nor are they backed by any type of security. Even with the best credit, because the lender assumes the greater risk, unsecured loans are usually granted with less favorable terms such as a higher interest rate. Credit cards and student loans are probably the best examples of unsecured loans. Another type of unsecured loan, one unique to Arizona, is a registration loan.

As the name suggests, eligibility for a registration loan requires some kind of state registered vehicle in the borrower’s name. Registration of a vehicle includes trucks, cars, motorcycles, RVs, scooters—anything with an Arizona vehicle registration. In addition to a state registered vehicle, borrowers need to show proof of income and provide a photo ID, usually in the form of a valid Arizona driver’s license. Some lenders may also require a social security card and a checking account.

Perhaps the main advantages of registration loans are that they are short term loans and, in general, easily approved. As long as the registration of the car is in your name, you qualify for a registration loan. You do not have to own the vehicle outright to be approved for a registration loan, which is why the loan is considered unsecured. Even though a lender cannot place a lien on a vehicle that you do not own, the short term nature of the loan requirements guarantees the loan is paid back with your next paycheck when the loan is debited from your bank account or arrangements are made to pay the money you borrowed in person.

Borrowers should not confuse registration loans with car title loans. A title loan is a secured loan using the title of your vehicle as collateral. Like registration loans, they are typically easy to approve and are used to borrow a small amount of money over a shorter period of time. In most instances, the credit rating for applicants is less a consideration or factor. To qualify for a loan, a clear title is needed.

Whether you have been stung by a period of unemployment or underemployment, a medical crisis or your car broke down and you need quick cash, loans are available to borrowers with poor credit to help pay bills or consolidate debts as they rebound financially. Personal or registration loans offer a chance for borrowers to rebuild or improve their credit. They come with a degree of responsibility and should only be used when needed.