The job market isn’t what it used to be. Many of today’s workers have little real job security and even more are living paycheck to paycheck. A recent survey indicated that 57 percent of Americans could not afford a $500 emergency. These facts make it extremely likely that, at some point in their lives, most Americans will need to take out some form of personal loan to cover emergency short-term expenses.
But the same set of circumstances that lead so many to have shaky job security and an inability to save also lead to poor credit scores. Most credit card companies will not even extend small lines of credit to those with poor credit ratings. This can make borrowing with bad credit tricky. How can someone without a good credit rating who is suffering from strained personal finances manage to get by in the event of unexpected costs? We’ll see that there are still a few decent options available, even to those with the worst credit scores.
Short-term borrowing alternatives to credit cards
There are several alternatives to using credit cards to bridge short-term gaps in your personal budget. A popular source of short-term debt financing for those with poor credit is alternative payday loans for bad credit borrowing. As the name suggests, these lenders offer a more reasonable and transparent short-term lending solution than traditional salary advance services. In many cases, a credit check is not required and money can be accessed as soon as the next business day.
Another option for short-term emergency loans is going through an automotive title lender. A car title loan is a form of secured debt, set up so that your car will serve as collateral. However, car title loans often allow the borrower access to far larger sums of money at much lower rates than payday loans. This can make them an excellent source for obtaining quick cash in large amounts if you have a poor credit history.
Although putting your car up for collateral may sound scary, most title loan companies do everything they can to avoid foreclosing on the loan and actually taking possession of someone’s car. Cars often make poor assets, constantly losing value while not even being used. For this reason, title loans are often relatively safe forms of secured debt, from the borrower’s perspective. And almost all title loan companies will allow the driver to continue using their car, just as they had before taking out the loan.
The only drawback of title loans is that you can only borrow a set percentage of what your car is worth. This amount is typically on the order of 50 percent of the car’s estimated value. For those with no car or a low-value car, the amount available may be small.
One of the best things that you can do to ensure that you will have access to emergency funds without depending on a high interest or otherwise unsecured loan is to maintain a good credit rating. Even if you can’t get a credit card, some prepaid cards offer the opportunity to begin building credit. These can be an excellent way to go from bad credit to a top credit score, within just one or two years.