The best loans for single mothers have the lowest interest rates and don’t have strict requirements to qualify.
It is tough raising a family on your own, but there are ways you can get help when you need it.
This article will show you where you can go to get the right loan to meet your needs.
Are loans good or bad?
Some might say borrowing is a bad idea, and they are right to an extent.
Some loans can be beneficial. However, it is vital you understand what you are getting into before applying for one.
As a single mother, more loan choices are available to you than ever.
We will explain all the different loan types and loans available to you so you can make the best choice for you and your family.
Watch out for predatory lending practices.
Single mothers having financial difficulty can end up borrowing in a hurry. Of course, there are lenders out there looking to take advantage.
Be wary of predatory credit practices when looking for a loan.
Emergency loans can be an easy way out of certain situations, but paying attention to the terms is essential.
Payday loans can leave you worse off. Their interest rates can get very high. Loans with high-interest rates are challenging to pay back. Especially if you are already having financial problems.
Most borrowers usually use the money to cover regular monthly expenses.
Then the next month, they are in the same situation, except now they have a debt to pay.
If you are in a financial crisis as a single mom, avoid high-risk loans unless it is the last resort. Also, ensure you can pay back on time, as the interest rates can balloon.
Before jumping on those emergency loans, take the time to explore other options. We will talk about other options in this article.
How does your credit score affect a loan application?
A credit score is a number that lenders use to decide how they deal with your loan application. This determines if you are eligible to get credit. It also determines the interest rates charged.
A credit score is a grade at how well you borrow and repay money to creditors. The riskier you are to lend money to, the more interest lenders charge.
Having a good credit score means that you also qualify for better loans. Low-income earners can have lower credit scores, which limit their loan opportunities.
The less you have, the harder it is to get a loan. As if that is not enough, it will also cost you more.
Some of the things that affect your credit score include payment history. An outstanding credit balance is also a factor.
When you manage your credit well, you get higher credit scores. This, in turn, lowers your cost of borrowing.
How to improve your credit score?
To improve your credit score, you can pay your bills on time, increase your credit line, and work with credit repair companies.
Report credit errors to the Consumer Financial Protection Bureau (CFPB).
If errors aren’t fixed, they can lower a credit score. The responsibility of spotting errors falls on you. Report the errors to credit bureaus that compile credit reports to correct errors.
You can also use free credit repair software available online.
Types of loans for single mothers
There are numerous loans that single mothers can enjoy.
Here are the main types:
Cash or personal loans: offer borrowers the flexibility to use the loan funds as they see fit and come with a fixed monthly payment.
Balance transfer loans: These loans enable borrowers to pay off multiple creditors quickly and easily by having the lender make payments on their behalf.
Co-borrower or joint applicant loans: This a loan where you get a co-signer to secure the loan. Applying with another person can help you become eligible for a larger loan amount and lower interest rate.
Auto refinance loans: can help lower your monthly car payment by adjusting the length of your loan term, and save money by securing a lower interest rate.
Car equity loans for single moms: Personal loans where your car is used as collateral to guarantee the loan amount.
Secured/Unsecured Loans: A secured loan is when you use something as collateral to get a loan, such as a car or property. Unsecured is the opposite.
Home Loans: These are available through banks and government programs like FHA or VA.
You want the lowest APR possible when you take a loan. A higher APR can keep you in a cycle of debt where you end up paying more in interest than the amount of money you borrowed!
What is APR
Anytime you get a loan, the most important thing is to understand how much it is going to cost you to borrow the money, how quickly you have to pay it back, and what the fees are if you are late.
Some of the things you should know about APR:
A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400 percent. By comparison, APRs on credit cards can range from about 12 percent to about 30 percent.
APR is the interest rate stated on a loan plus fees, origination charges, discount points, and agency fees paid to the lender.
APR can not be less than the stated interest rate, although APR and the stated interest rate can be equal.
0% APR means you pay no interest on the transaction, but some 0% APR agreements may be temporary or have upfront/one-time fees.
A lower APR is better for a borrower than a higher one and it will also vary based on the purpose of a loan, its duration, and the credit history of the borrower.
How does APR affect your loan
If you get a low APR loan of 8% on a loan of $500 from a bank, that loan would cost you $64 to borrow that money for a year.
Whereas if you get a poor APR like with a payday loan they will avoid even telling you the APR. It works out to about 400% meaning you would pay $2000 to borrow $500 for a year.
How to look For Loans
Often to find out if you can qualify for a loan or how much it will cost you have to apply for it and this can lower your credit rating.
One way to avoid this is to use an online loan checker like Credible. https://www.credible.com/.
You can input what you are looking for and details about yourself and it will let you know the best loan for you.
Fixed interest rate vs. variable interest rate
Your interest rate might be the single most important factor in choosing a loan. After all, your interest rate defines how much you’ll pay for you loan. Depending on your loan, you may be offered a fixed rate or variable rate.
A fixed rate loan is pre-set for the life of the loan, whether that be three or 30 years, your rate won’t go up. Knowing what you’ll pay each month can help you budget repaying your loan. A variable interest rate loan can increase incrementally, depending on your specific loan terms. Variable rate loans often offer low “teaser” rates, which can be attractive, but managing increases can be difficult to plan for.
Home Loans for single mothers
Government Home Loans
If you are looking for a loan for housing needs the US Department of Housing and Urban Development (HUD) is the first place a single mother should look.
Your local HUD office has free housing counselors who can answer your questions about buying a home. They can help you through the whole process from how to find the best loan as a single mother.
You can find a HUD housing counselor near you. They might know of some local loan programs available for single mothers that are not easy to find online. They can explain what financial aid is available to you.
HUD has programs that can help single mothers, like the Housing Choice Voucher (HCV) homeownership program. This program supports families to use their housing vouchers to buy a home and to meet the monthly costs of owning a house.
There are income and other requirements, but if you are a single mother, there is an excellent chance that HUD can help you in some way.
Federal Housing Administration (FHA) loans
FHA loans are home loans given by the US government. These are home mortgages insured by the government and issued by approved lenders. Single mothers are given priority. The loans help single moms purchase homes at lower prices.
FHA loans are easy to apply for and require lower credit scores and down payments than most loans.
When applying for an FHA loan, you must know your budget. Take your time to compare the offers to get the best deal with good repayment rates.
What you need to qualify for an FHA loan
- Two years of work history
- Verification of your income.- paystubs, tax returns
- The property has been appraised and meets the guidelines.
For more information, visit the website.
United States Department of Agriculture (USDA) Loans
The United States Department of Agriculture's rural development program funds people in rural areas. The department's single-family housing loan program is worth checking out. They collaborate with lenders and offer affordable homes.
No down payment is required, and the rates are low. This, in turn, significantly lowers your home-buying expenses.
If you qualify as a single mother, you can own a rural home after accessing these loans. This can be an opportunity to get out of monthly rent and onto the housing ladder.
Visit the USDA website to apply.
VA loans for single mothers
VA helps veterans, service members, and eligible surviving spouses to buy homes. They provide a home loan guarantee benefit and other housing-related programs to help you buy your home. You can also get loans to build, repair, retain, or adapt a home.
If you are eligible for a VA loan through military service or as a surviving spouse of a vet, this program is excellent for you.
The loans are available to military vets and their families with no down payment. The U.S. Department of Veterans Affairs does not require mortgage insurance. There is a one-time, upfront funding fee.
VA loans usually have some of the best mortgage rates. This means lower mortgage payments.
Your length of service, duty status, and character of service determine if you qualify for specific home loan benefits.
If you’ve served for at least 90 continuous days, you meet the minimum service requirement.
You can get a Certificate of Eligibility if you’re the surviving spouse of a veteran. Or the spouse of a veteran missing in action or who is a prisoner of war.
Other Home loans for single mothers
Many banks have special programs for single mothers to obtain home loans. Ask your bank or Credit Union if they have a program that you can apply for. Here is information about two of the biggest programs available:
Wells Fargo Home Mortgage
Wells Fargo is among the biggest mortgage lenders in the US. Wells Fargo Home Mortgage provides access to new home purchases. It also refinances loans. They also offer funds for mobile homes and properties in manufactured home communities.
Single mothers with low income, limited credit history, and low down payment needs can benefit. There is also a potential for minimal out-of-pocket expenses with seller contributions.
Loans that don’t require monthly mortgage insurance are also available.
Minimum requirements for the Wells Fargo Home Mortgage
Your credit score must be at least 620 to qualify for a mortgage.
The bank also considers alternative credit data to help some borrowers qualify for certain loans.
Their “Dream. Plan. Home.” program requires a down payment of only 3% on a fixed-rate mortgage. This is for buyers with a combined qualifying income below 80% of the area median income.
Bank of America mortgage loan
Bank of America has multiple loan options for low and middle-income borrowers. You can complete the loan application process online.
While fair credit is an advantage, the bank has several options for people who may not have a sizeable down payment to qualify for other mortgages.
There are also down payment and closing cost assistance programs.
Single mothers can take advantage of the bank's Affordable Loan Solution program. This enables borrowers to buy a house with as little as 3% down.
How to apply for a Bank of America loan
You can apply online, and documentation to prove your income, employment and assets should be on hand.
The Bank of America’s Real Estate Center helps you find local houses. When you find a home you want to buy, make an offer and fill out an application for a mortgage.
Student loans for single mothers:
Ensure you exhaust all your grant options before applying for a college loan. As a single mother, you can usually qualify for these grants easily. It doesn't matter if you have bad credit, and the grants don't need to be repaid.
There are many grants available to help low-income single mothers pay for college. The first step in applying for a grant is usually filling out the FAFSA form.
The Pell Grant is a grant that does not need to be repaid and will increase from $5,350 to $6,900 over the next ten years.
The FSEOG program is administered by colleges and can grant up to $4,000 to those in need.
Other grant programs include the Women's Independence Scholarship Program, Raise the Nation Foundation, Capture the Dream Fund, Soroptimist International, American Association of University Women, and Adults Belong in College scholarship (ABC).
Student Loans for Single Mothers
If you need to take a loan out to cover expenses while you are in further education, try one of the following: they have excellent terms.
Stafford loans are low-interest loans for eligible students to help cover the cost of higher education. This can be college, university, or technical school. You can borrow directly from the U.S. Department of Education at participating schools.
Since loans are for students, interest rates are lower, and you don’t have to repay the loan until you graduate.
Types of Stafford loans
Subsidized loan: This is awarded based on financial need. It is determined information you submit on the Free Application for Federal Student Aid. If you are eligible for a subsidized Stafford loan interest will not be charged while you are in school on an at least half-time basis. Interest will also not be charged during certain defined deferment periods. The interest is paid by the government during these periods.
Unsubsidized loan: This is not awarded based on need. You can still apply using the FAFSA. Interest will be charged from the time the loan is disbursed until it is paid off in full. You can defer payment of interest while you are in school and during any deferment period. However, if interest accumulates during these periods, it will be capitalized. Meaning interest will be added to the principal amount of your loan.
GRAD Plus Loans
The Grad PLUS is a direct federal loan available to eligible graduate and professional students. These can help single mothers to finance their education and include living expenses. The loan is intended to supplement direct unsubsidized loans.
The U.S. Department of Education offers these loans to qualified students through schools participating in the federal direct loan program.
The good part is that Federal student loans come with better consumer protection.
How to Apply for a Grad PLUS Loan
You must complete the Free Application for Federal Student Aid. Many schools require you to apply for a loan online, but application processes differ.
The Federal Student Aid website has a list of schools that participate in the direct loan program. During the application process, a credit check will be performed.
Personal loans for single mothers
Personal loans are flexible as they can be used for various purposes. Good credit history and stable income give you access to the best personal loan lenders.
Eligibility depends on the lender and the purpose of the loan. Most lenders consider credit scores and income with what you want to do with the money.
You may need to turn to a fair or bad credit lender if your credit history is bad.
Crowdfunding Loans for single mothers
Crowdfunding is a relatively new way of borrowing and lending. The platforms that provide it are often dedicated to helping people who don't usually have access to loans.
Kiva is a source of crowdfunding for personal loans, and they have a category just for single parents. You can borrow up to $15,000 at 0% interest. This international organization provides loans worldwide, including to people in the United States.
A Peer-to-Peer Personal Loan
Peer-to-peer loans are also called person-to-person lending, and they often have fantastic interest rates that are much lower than banks.
These loans are not specifically for single mothers. Still, they are worth mentioning because they often have lower interest rates than traditional sources.
The other great thing about Peer-to-Peer loans is that typically you can have a lower credit score and still qualify than you would for a conventional loan.
Prosper was one of the first peer-to-peer lending platforms, and they have helped connected users with more than $22 billion in loans.
Upstart is an online lending platform partnering with banks for borrowers with a personal loans. Upstart’s model considers education, employment, and other variables when determining eligibility. You can qualify even if you have a poor credit history.
Applying for an Upstart personal loan is simple, and the whole process can be completed online.
MoneyMutual has short-term loans.
The loans have flexible approval standards and monthly payment requirements.
The network features one of the largest groups of lenders specializing in bad credit financing.
Your chances of approval are high as your loan request is put in front of as many lenders as possible.
Lenders will compete for your business by extending their best possible loan offer.
Car equity loans
With a car equity loan, you have to have the title to a car or truck to put it up for collateral.
While you get cash, you risk losing your vehicle if you default on the loan.
The vehicle should be worth at least $5,000 and must have insurance. You must have proof of employment and provide a copy of a utility bill with the current address.
The lender will come and repossess your car if you don’t make payments. If you need your car for work this can be risky.
Other Personal Loan Companies
Figure has personal loans for borrowers with good or excellent credit. The application process can be completed with a prequalification check that doesn’t impact your credit. If approved, you can get the money within two days.
To be eligible for a loan with Figure you’ll need a 680 credit score or higher. You should also have at least $1,000 in cash reserves for a 36-month loan or $1,500 for a 60-month loan.
Upgrade is a good option if you have bad or fair credit. You don’t have to use your home or car as collateral since the loans are unsecured. These personal loans range between $1,000 and $50,000 at low fixed rates. Eligibility is based more on free cash flow.
CashUSA.com provides a free short loan request form to get you many loan offers in minutes. You can take advantage of their financial education modules. The modules teach you essential terms to know when looking at offers. These will help you make better-informed loan decisions.
BadCreditLoans.com helps consumers having difficulty finding loans elsewhere. The network partners with many lenders with forgiving approval standards and can provide short-term loans to those with bad credit.
Payday loans for single mothers
As a single mother, you may need emergency financial aid. This is where emergency loans come in. While these loans can solve your short-term financial crisis, some of them can be predatory.
Many states do not allow payday loans or limit the interest or fees they can charge.
Payday loan companies do not require you to offer collateral for a loan. There are no credit checks. The amount you get depends on your income.
When you get payday loans, there will be a payback date. This is usually on your next payday. You will pay the amount you borrowed plus interest.
If you can’t get a loan elsewhere, and it’s an emergency, you can take one of these loans. Failure to pay on time means the interest rates continue rising.
These loans tend to charge unfair interest rates, which keeps you in a cycle of debt.
Your income determines if you are eligible. If you have enough money at payday to pay back the loan you ask for, you usually get that amount. To get the loan online, you need a bank account.
Other Government Programs That Can Save You Money
Before you take a loan, make sure you can’t get help from other government programs like TANF, SNAP, or Medicaid.
The Affordable Connectivity Program (ACP ) is another program that can help you save money. It frees up the cash that you were spending on cell phone bills so you can use it to pay for other things.
The Federal Communications Commission runs the ACP. The program helps low-income households access internet services.
When you qualify for the ACP with EASY Wireless, you get unlimited free data and free calls and texts.
EASY Wireless has been helping Americans with free and low cost phone services for over 20 years.
We believe in creating a wireless safety net for our customers where they don't have to worry about monthly cell phone bills.
The best loans for single mothers
We recommend that as a single mother you try to get grants before you take a loan. Getting help from government programs can ensure that you don’t need to borrow money in the first place.
If you do need a loan make sure you get the best interest rate possible and are aware of all the charges associated with the loan.