Traditional lenders, like banks, are often the first loan source that come to mind, but in fact, there are a variety of alternative loan sources available. Private lenders provide options that can be more affordable and more effective than established institutions can come up with. So, when it comes to unsecured loans for those with bad credit, they are well worth considering.
Of course, as with all loans, securing approval from private lenders requires certain qualifications, though these can vary dramatically depending on which alternative lender is approached. What is certain is that approval is more likely to be given, even to bad credit borrowers.
The only thing that really matters is that the borrower has an ability to repay the unsecured loan granted. We provide a few examples of the best alternative loan sources out there, and how they can benefit your search for funds.
The Family Loan
This is arguably the most affordable option, as there is often no interest charged on a loan secured from a family member, or perhaps close friend. But the biggest advantage is that approval is guaranteed, making it ideal as an option for unsecured loans for those with bad credit.
There are only two conditions to this kind of deal. Firstly, the borrower needs to have a close family connection. And secondly, the family member has to have the sum requested to hand it over. But as the chances of approval from private lenders go, this is arguably the best option.
What is more, the pressure to repay the unsecured loan is much less from a family member than a lending institution that is trying to turn a profit. And, if there is any problem with the repayment schedule, a new one is easily negotiated. Also, to ensure clarity relating to the terms, write them down and have both parties to sign them.
The Company Loan
Another worthwhile alternative to a bank is your own employer. This might seem strange, but some companies are willing to grant loans, such as unsecured loan, for those with bad credit. The reason? It is a safe investment from the employer viewpoint.
Since the employer is the source of both the income and the loan, they can simply deduct the monthly repayment from each paycheck. This means that repayments are never missed. So, in terms of getting approval from private lenders, this option is pretty much guaranteed.
Keep in mind that employers often charge a small interest rate, allowing them to profit from the transaction - though, it is certainly lower than any bank would have charged. Also, like a family loan, getting an unsecured loan from your employer has no effect on your credit rating.
The Online Loan
Online lenders are one of the most popular alternative loan sources to traditional banks and credit unions. However, a private lender is not an online firm, but the relatively new phenomenon known as the loan bidding site. It is a prime source of unsecured loans for those with bad credit.
Basically, when someone is in need of a loan, they post a loan proposal on a website. Members of the site bid for the chance to part-finance the funds, and earn back a little through interest payments. When the borrower spots the bids that suit them best, they can accept the lenders and secure the funds.
Effectively, this system means that approval from private lenders is not needed. Instead, approval is provided by the borrower. There are conditions to meet too, such as providing information on income and credit history. These can be checked out by prospective lenders before they bid. But an unsecured loan can be attained quickly and affordably.