Fundo Tips

How to Benefit from Bad Credit Loans

By December 28, 2019 No Comments

Not everyone is privileged, and not everyone can make ends meet without a little bit of help. And sometimes, when life knocks you down, it smacks you with Mjolnir (Thor’s hammer) as well. Are you one of these people? There is still some hope for you—all you need is to apply for a bad credit loan.

Some people need some help with their finances. When they do finally get the help they need, they can unfortunately end up in an even bigger financial mess and with a bad credit score. This scenario is not always self-inflicted. Some people are victims of their circumstances. 

For example, you may have borrowed some money from the bank to pay for some medical expenses. However, halfway through making repayments for the loan, you lost your job and you were unable to make payments for a long time. By the time that you found a new job and you were doing much better, your credit score had gone down. Now, you need some funds for something, but lenders consider you as a risky borrower. Again, that is why bad credit loans exist.

What is a Bad Credit Loan?

Bad credit loans are loan options for individuals whose low credit scores limit their borrowing options. It is similar to a personal loan, however, it is available to people who cannot borrow money anywhere else due to a bad credit score.

This option is available if ever you need quick money or fast financial help. You can use this type of loan to buy or repair a car, make payments on a medical bill, or consolidate credit card debt. 

As mentioned previously, this loan is similar to a personal loan. Bad credit loans allow you to borrow money and pay it back in fixed monthly instalments. This type of loan is available in some banks. However, you should expect that their interest would be higher than typical loans and that their qualifying requirements would be strict.

If you are looking for options with a more affordable interest rate and flexible qualifying requirements, the better options are as follows:

  • Credit unions 
  • Family or friends
  • Find a co-signer—you can use the high credit score of your co-signer to get a lower interest rate
  • Check out home equity—a credit score is not a factor here. If you have equity, you can get a loan
  • Online or P2P—many online lenders can be very flexible with terms

There are other options that you can consider, such as payroll advances, loans from retirement accounts, or borrowing against life insurance to the list. However, you should only use these options if nothing else worked for you.

What Is a Bad Credit Score?

Credit scores exist so lenders can gauge the likelihood of whether a borrower will repay a loan. The higher your score, the more likely you will repay. If you have a low credit score, lenders will see you as a risk. They can assume that you will run away from your debt based on what your score is.

Some lenders might still give you a chance to borrow money, but only if you agree to a high-interest rate. 

However, keep in mind that good and bad credit score can vary from one lender to another. What is already considered “bad” by one lender can be considered as “still okay” by another one. Make sure to shop around first.

The Effects of Bad Credit Score to Borrowing Funds

Individuals with good to excellent credit scores are always offered the lowest interest rates and best loan terms, while consumers with poor or extremely bad credit scores are burdened with high rates. They are more likely to get rejected for a loan as well.

At this point, most consumers are aware of how the finance industry operates. That is why most people try to maintain a good score from the start. However, not everyone is fortunate. As mentioned previously, some people are victims of their circumstances. 

Considering Bad Credit Loans

No one wants to have a bad credit score. So the best plan is to build your credit while you are still young and then maintain it. But whether we like it or not, life likes messing with us sometimes. Our financial situation has its ups and downs. 

There will be times when you are unable to earn enough money for all your bills and other monthly payments. Or maybe you have spent a little too much on your credit card. Now, you are struggling with your credit card’s high-interest rate.

If an individual has bad credit, they will encounter difficulties, especially when it comes to applying for another loan. A bad credit score can potentially affect you emotionally and financially.

Benefits of Bad Credit Loans

Bad credit loans exist to cater to the needs of individuals who have bad credit scores. So, if your credit score is getting in your way from getting the funds you need, go ahead and shop around for a bad credit loan.

Despite the rejection of traditional banks, alternative lenders can still approve your application for a loan. 

Here are some of the advantages provided by bad credit loans:

1. This type of loan does not require a credit history check.

As someone who already feels down for having bad credit, the last thing you want to hear is that your lender wants to check your credit history. This step in the loan application process is like rubbing salt on your painful wound. Fortunately, bad credit loans do not require this step during the application process. Any negative record or defaults you had in the past will not affect your application.

Your lender will focus on seeing if you have a steady job or sufficient income to pay your current bills. They will also want to know if you have assets that can cover the requested loans. If you have had a stable job for at least one year, then it raises your chances of getting approved.

2. Bad credit loans can improve your credit.

This type of loan can give you access to the necessary funds to pay off your other debts. Then, you are also given a chance to manage your financial situation responsibly. This allows you to make payments on time. 

Since this type of loan gives you a new start, you need to be more inclined to improve your credit score. You can manage your debt effectively through budgeting and staying on track.

3. You can borrow large amounts of money. 

Unlike traditional loans, you can borrow a large amount of money despite having bad credit. The important thing is that you manage your debt and pay it all off. You also need to have an income that covers the monthly payments you need for your loan.

You also need to check the hidden costs and fees associated with the loan. You should also ask lenders about any additional fees or check the fine print on the agreement.

4. Bad Credit Loans offer flexibility and variety. 

Each individual has different needs. Two people can have the same problem but still require different solutions due to their circumstances. Good news for you though, some bad credit loans can be customised according to your needs. However, you need to find the right lender first. Some lenders will factor the amount of the loan, repayment plans, term, flexibility, interest rates, and so on for you.

If you plan on applying for a bad credit loan, you need to be honest about yourself. You need to explain your financial situation to your lender as accurately as possible. Make sure that they are entirely aware of your financial situation. Finding the right offer takes time, so do not rush and accept the first offer you get. 

5. It is possible to get your money fast.

Bad credit loans get approved faster than conventional loans. So, if you need fast cash or if you are low on savings and you have other debts that you need to pay, then bad credit loans are the way to go.

Bad credit loans are the fastest loans to secure. For instance, it only takes a few hours before a payday loan can be obtained. But, you should not wait until your financial situation gets bad to take any action. Just keep in mind that bad credit loans can help you improve your credit score in case you find yourself in a bad financial situation.

Conclusion

It may not be your fault that you have a bad credit score, but you lack the initiative to improve your situation if you stay there. You can use bad credit loans as a tool to get you out of financial trouble. However, applying for multiple loans is still frowned upon, so apply responsibly. Make sure that you do plenty of research about the loan and understand the terms that come with it. Bad credit loans give people with low credit scores a second chance at stability. If you feel like you have tried everything and nothing worked, you can consider this type of loan.

Leave a Reply

© Fundo Loans 2020. All Rights Reserved.