It has always been the practice of lending institutions to carry out a thorough check on the credit history and score of every borrower before approving for any loan. This has made some borrowers with poor credit history caught in a quagmire of not knowing where to go when an emergency strikes.
However, in our millennial age, things have been simplified provided you are willing to dig deeper into your pocket. There are financial institutions which are specialized in giving loans to people with bad credit. These bad credit loans can be beneficial to someone who doesn’t have a good credit score.
Types of Bad Credit Loans
According to FICO, over half of the Americans have attained a bad credit score of 620 and below. This has made bad credit loan lenders very successful in the region. If millions of people want to deal with an emergency, then they will have a difficult time getting one.
Although in a normal world, you should be digging into your pocket to get money to cater for any emergency. Nevertheless, this is not always the case. A recent study conducted in the United States of America shows that over 60% of Americans have at most $500 in their accounts.
That should tell you the hazard that comes along when a huge need for money arises. They will always run into borrowing and applying for loans. If some of them have a poor credit score, they rash online loans for bad credit.
As you may know, bad credit loans are typically personal loans for poor credit. Therefore, anyone who has a poor or bad credit score can easily get bad credit loans guaranteed approval. So what are the major types of bad credit loans?
- Payday Loans – These are loans that are short-term and have very high interest. Payday loans bad credit loans are usually advertised as a way of getting money ASAP to cater for your emergencies. You are required to repay it as soon as you get your paycheck. You go to the payday lender write them a check which contains all the amount you are to borrow plus their interest. When your salary hits your account, they cash your check.
- Title Loans – These are loans for those with bad credit where you secure the loan using your logbook or the title to your vehicle. You borrow hundreds of dollars which you are supposed to pay after two to one month. That’s very dangerous because you might end up losing your car. It has very high-interest rates, which are usually 300%.
- Cash Advances – This is another personal loan without any credit check which is usually offered by online lenders and other storefront lenders. This loan is just like a payday loan. They work similarly. You go to the lender, write a check that contains all the money and interest, then the lender gives you the money. When the payday comes, they cash in the check.
- Bad credit installment Loans – In this loan, you usually repay in installments or scheduled payments. They are more affordable to many borrowers because the lender doesn’t demand a lump-sum payment at once. They are better alternatives compared to Payday, Title loans, or cash advances.
How Do You Get a Loan If You Have a Bad Credit?
Depending on the agency of your needs, you can decide to go for any of the type mentioned above. You can decide to go for cash advances, bad credit installment loans, title loans, or payday loans. However, always consider their interest rates and their repayment period. Most of these personal loans for bad credit come with hefty interest rates and very short repayment period except for bad credit installment loans.
3 Factors to Consider When Finding the Best Bad Credit Loans
- Interest Rates – This is one factor you cannot afford to ignore when you are going to repay within a month or less. Most lenders of bad credit loans usually impose very high interest for up to 400%.
- Repayment Period – Consider the repayment period and gauge yourself whether you can repay within the period before taking a loan.
- The reputation of the lender – Some lenders can be very cruel to the borrowers and will do anything to get their money. Go for a reputable lender.
Times of emergency will come, and you will need money. Sometimes you might not even have the best credit score required by various financial institutions and banks before giving you a loan. In such circumstances, you have bad credit loans lenders ready to provide you with the money. However, do some research before settling on the type of bad credit loan. Consider the rate of interest before taking the loans.