Bank Loans with a Co-Signer
The first thing you should do if you can’t get a personal loan from a bank is to ask if you would qualify for the loan if you found a co-signer willing to help you take out the loan. A co-signer is someone who puts his or her name and credit on the line next to yours, thus securing your loan in case you default. In more simple terms, they will pay the payments on your loan if you default and don’t pay.
There are several reasons why this option should be the first one you seek out, but the two biggest reasons have to do with cost of the loan and the time in which you can pay the loan back. Loans with co-signers will cost the same as any other good-credit loan (typically some spread over the LIBOR rate or a fixed rate that is close to the 30 year mortgage rate), and you will be able to pay them back over several years. In addition, you will be able to take out more than a 5000 personal loan, which is basically impossible to get with a payday loan.
Payday Loans and Title Loans
Payday loans and title loans are really the last option you have if you find yourself in a situation where a bank won’t give you a personal loan. Basically, avoid these loans completely unless you find yourself in a truly dire situation – i.e. a real emergency where you need cash now but can pay it back by the time you get your next paycheck.
Both payday and title loans are high-cost, short-term loans and are available to just about everyone that has a job, makes over $800-$1000 per month, and has a valid checking account (of course, with a title loan you also have to have equity in your vehicle to borrow against and sign over the rights to your car). But, just because you qualify for these loans doesn’t mean you should just take the easy money. These are the most expensive loans available to borrowers, have to be paid back within a few weeks, and really don’t build your credit score – in other words, there isn’t much upside to taking out a payday loan or a title loan. But there is a lot of downside in terms of high fees and interest rates, and your credit score can be hurt if you default on the loan. As such, don’t let a small 1000 personal loan (the average payday loan amount) ruin you financially – make sure you can pay it back and that you really need the money before you decide to go with this option.