It's an old truism that the people who need loans and credit the most are those who have the hardest time getting them. If you have a marginal or poor credit score, you might think it's impossible to get a loan when you really need one, for whatever reason: emergency car repairs, sudden medical bills, home repairs, a small business loan, or even getting a mortgage.
If you've been denied credit in the past, you may think securing a loan or a mortgage is out of your reach. However, you have more borrowing options than you might imagine, including the following five accessible personal loan options.
Home equity line of credit
If you already own a home, and have equity in it, you might want to consider getting a home equity line of credit (HELOC). Doing this is not without risks since you are putting your home up as collateral, but this also lowers the risk of the loan and makes it easier to qualify even with a poor credit score. But if your need for a loan outweighs your aversion to that risk, it is possible to secure a tax-deductible line of credit at a reasonable interest rate, with no restrictions on how you spend the money.
You will need a loan-to-value (LTV) ratio of about 80 percent in order to qualify for a HELOC, meaning you need to have an equity stake in your home of 20 percent. Sound like steep qualifying terms? Even if you had good credit, most lenders would still require an LTV of 80 percent.
Fortunately, the housing market has recovered significantly since the 2008 mortgage crisis. Even if you were once underwater in your mortgage, you may find that you now actually have equity in your home. How much equity? If you don't want to spend money on a formal appraisal, you may be able to get estimates it by doing a little online research at sites like Zillow and Trulia.
If you do find yourself able to qualify for a loan, be sure to comparison shop to ensure that you're getting the lowest HELOC rate available to you before you sign on the dotted line. As with most less-than-perfect-credit loans, interest rates on HELOCs tend to run higher.
Get a loan from a credit union
It's much easier to get a loan from a credit union than from a bank, as their credit standards are often more relaxed. Almost anyone should be able to join a credit union, and membership eligibility is often as simple as residing in a particular location or being the member of a type of profession. Since credit unions are nonprofit entities, they can offer loans and other financial services much more cheaply than profit-driven banks, and their level of customer service is often much higher.
Peer-to-peer loans (P2PL) have existed since 2005 and are usually obtained online from a peer-to-peer lending site such as Prosper, Lending Club, Peerform, or several others. These websites enable prospective borrowers to obtain loans from individual lenders rather than from a bank or other financial institution. Peer-to-peer lending's benefits have made it increasingly popular; It simplifies the loan process and enables borrowers to obtain loans with interest rates as low as 6.50%. P2P loans are also more readily available to those who may not be able to get a loan anywhere else, because of bad credit or other factors. However, these loans are unsecured and not protected by government regulations, so think carefully before considering a peer-to-peer loan.
This may not always be easy, but if you can find someone like a family member, close friend or a colleague with good credit, you could obtain a loan by having the other person co-sign for the loan. There's a great deal of trust involved in a co-signed loan since if you can't repay it, your lender will expect your co-signer to satisfy the debt. In addition to having the obligation to repay your debt, if you fail to repay the loan in a timely manner or default on the loan, this will damage both your credit scores. Co-signing a loan for anyone is a big favor to ask that can put stress on your relationship.
Loan from a family member or friend
This is listed last since it's probably the most difficult kind of loan to ask for. Asking for a loan from a family member or a friend doesn't depend on your credit score, but it can put an important relationship at risk. Getting a personal loan from someone close to you should probably be your last resort. Only do it if you're sure you can pay it back promptly.
It's also highly recommended that you draft a loan agreement that clearly spells out the terms of the loan: the interest rate to be charged, the number and amount of payments, and the duration of the loan. Doing this at the outset of the agreement will prevent hurt feelings, damaged relationships, and even possible legal action. This loan arrangement requires good faith on both parts and should only be entered into if you're absolutely sure that you can pay back the loan in full and on time.
This article originally appeared on gobankingrates.com.
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