Something happened in your life, and you simply need some extra cash. It might be due to the fact that your utility bills are higher than normal, or maybe you have to replace a major part that is broke in your vehicle. You don’t really need too much cash- 500 dollars, or maybe a little bit more.
We all would like to have a savings account to use when times are tough. But for many Americans, this just isn’t a feasible option. Some studies done recently have shown that about 60 percent of all adults in the United States only have $500 or less put away for a rainy day. That isn’t all the bad news, either. Over half of all Americans are struggling with a bad credit score, which is a FICO score of 620 or even worse.
So, you need cash now, but your credit is not up to speed. Don’t worry, you really aren’t alone. But just what can you do?
A bad credit score really shouldn’t mean having to take out a loan with high finance fees and strict deadlines. That is why we are proud to offer bad credit loans that are a lot different than most companies. Our loans come with longer deadlines and higher amounts. The best part is our APRs- borrowers who have bad credit will enjoy a rate that is up to 125% less than other companies.
Understanding Bad Credit Loans
Bad credit loans are designed for borrowers who have problems with their credit. They may have a low credit score or no credit to speak of. Many financial institutions offer these types of personal loans, such as online lenders, credit unions, and banks. However, most bad credit loans come with a cost. Numerous lenders charge their customer higher interest rates because of their past credit history.
Many borrowers are unsure of what a good credit score is. If you have a FICO score that is below 630, this is generally considered a bad score. You can use the chart below to find out what your credit score really means. If you are unsure of yours, you can request a free score from websites such as Experian.com and CreditKarma.com.
FICO Credit Score Ranges
- Excellent Credit- A score of 720-850
- Good Credit- A score of 680-719
- Fair Credit- A score of 630-679
- Subpar Credit- A score of 550-629
- Bad Credit- A score of 300-549
Understanding How a Bad Credit Loan Works
Many borrowers are shocked to find out that lenders will charge high-interest rates even though they have a low credit score and are broke. There is a reason for this line of thinking, even if it seems backwards. Having bad credit means that you have a bad history when it comes to paying on past debts. You either paid many of them late, or you didn’t pay them at all. Because of this, lenders see you as a high risk. Since you don’t normally pay your debts, why would it be different for them?
In order to compensate for that risk, a lender will charge a higher interest rate when they are dealing with a person with bad credit. This is to make sure they make money on the loans that do get paid back, which helps to offset the costs they have to suffer when borrowers end up defaulting on the loans.
For example, if 100 people take out a loan and 20 of those borrowers skip out on the debt, the lender needs to collect enough money from the 80 people who did pay in order to make a profit. Those with good credit typically repay the loan back more often than not, so lenders may not charge them as much in interest.
Bad credit loans can seem like a lifesaver when you are broke and desperate for cash. However, when you really look into these types of loans you will see that they aren’t as wonderful for your finances as you may have thought.
Bad Credit? You Do Have Options
Unsecured loans require borrowers to sign a contract that states they promise to repay the loan while following the terms and conditions. Failure to repay the loan may result in the lender pursuing the money owed to them through a collections agency. Unsecured loans are usually found with credit cards, personal installment loans, and student loans.
Secured loans require the borrower to put up collateral to “secure” the amount they are borrowing. This may be in the form of a home, car, motorcycle, or expensive jewelry. If the borrower cannot repay the loan, then the lender can seize the collateral in order to sell it off and recoup their loss. Pawnshop loans, mortgages, and car title loans are all types of secured loans.
Payday loans are technically secured loans. That is because if you cannot repay the loan back by the due date, then the lender will cash the check you left behind as security for the loan.
Bad Credit Loans and Their Average Risks
1.Payday loans and cash advances- 400% High Risk to Borrowers
2.Title loans- 300% High Risk to Borrowers
3.Bad credit installment loans- 100% Low Risk to Borrowers
How Safe are Bad Credit Loans?
Bad credit loans, also known as no credit check loans, can be risky. Lenders won’t check into credit scores typically won’t be offering you a loan that is responsible. Lenders who do not care about your credit rating will not care about you or your finances.
The Risk of Bad Credit Loans
Say you are looking to buy a brand new laptop for work. You could check out local stores online and find the ones that have good customer reviews. These businesses may also offer friendly customer service representatives that will do whatever they can to answer all of your questions or concerns. You could also buy it from some stranger who has a bunch of them in the trunk of his car in the alley. It’s the same laptop, so what is the difference?
Well, whether you are dealing with laptops, cars, appliances, or personal loan lenders, there is a difference when it comes to the financial companies you work with.
If you start searching for a bad credit loan, be prepared for a bunch of strangers to start calling and emailing. They will fight to offer you the cash you need without doing a credit check. Sure, that sounds great right now. But the catch is that you will be stuck with a very high APR. The loan will be due back within just a couple of weeks, and you may be in for a future of debt extensions because you cannot repay the loan.
We know that isn’t what you want. However, you still need money quickly, so what can be done? There are ways to find a legitimate, responsible lender in your area who can give you the cash that you need right now. These types of lenders may actually even improve your credit score- a win-win for everyone involved!
If you are suffering from a bad credit score and need cash now, look for lenders who provide installment loans, instead of payday loans. Payday and title loans will often quickly make a mess of your finances and are not worth the risk. Typically, every four out of five payday cash advance loans are rolled over or extended, causing the borrower to pay more in interest. The average payday loan borrower will spend about six months in debt to the lender. The odds of paying off the loan in the two weeks it was originally supposed to be for are against you.
Instead, look for loans from lenders who advertise personal installment loans. These types of loans have longer terms and lower interest rates. They are designed to give the borrower more time to pay them off.
Considering a Repayment Plan
You should always consider whether or not you can repay the loan before you sign on the dotted line. The lender should consider your finances, as well. Predatory lenders will have no problem trapping you into a high-interest, short-term loan because they know the chances of re-borrowing are high. A lender who is responsible and reputable will want to check out your banking statements, verify your income, and work with you to make sure you can repay the loan when it is due.
Soft Credit Checks- What are They?
If a lender has no interest in checking your credit score, you can rest assured that they do not have your best interests in mind. Don’t sign anything with a lender who doesn’t require a credit check.
It is also wise to avoid any lender who does something called a “hard credit inquiry.” This type of credit check can harm your score in the end. They are initiated by either lenders or credit card companies. They will require your permission and can stay on your credit report for two years.
Instead, look for lenders who perform “soft credit checks.” This means that you can run a soft credit check for yourself, or the lender can initiate it for you. A soft credit check will have no bearing on your credit score. They are a safer alternative to hard credit checks.
Repayment Plans and Flexible Terms- What to Consider
A short-term payment plan is a red flag when it comes to predatory lenders. These lenders usually want their loan back in two weeks, along with the finance fee. Title loan lenders usually offer terms of about 30 days. Because of the time frame, along with the very high APRs, many borrowers have trouble making their payment on time.
Instead, consider a personal installment loan that offers longer terms. A longer term means a monthly payment that is lower. You’ll also have more time to get the loan paid off.
Installment Loans can Help Your Credit
If you are searching for a bad credit loan, then you probably have bad credit yourself. So why not choose a lender who will report to the credit bureaus concerning the loan? An installment loan lender will often report your on-time payments, which can actually help build your credit over time.
Loan Truth- A Responsible Lender
If you have been dealing with a low credit score, then you are well aware of how frustrating it can be. However, you really don’t have to live with this issue forever.
Problems with your credit can be fixed over time. To start, identify the bad habits that are causing your credit score to drop. Then, put a stop to them. Maybe you keep opening up new credit card accounts and then fall behind on the payments- stop. Don’t allow any lender to run a hard credit check on you. You should also never allow a predatory lender to convince you to take out a short-term loan that you cannot repay.
If you choose a loan from Loan Truth, you are choosing a company who will only do a soft credit check on you. This will not impact your score in any way. We will only focus on your actual ability to pay off the loan. We will make sure you aren’t borrowing more than you can repay. Plus, our flexible repayment schedules make it that much easier to pay down the loan. You’ll love our wonderful customer service- we will actually answer the phone when you call us! You won’t get that with predatory lenders who only want your money.
We know that it is a huge decision to take out a bad credit loan. We want to make sure that you choose a lender who truly cares about your future. Choosing us as your financial partner will ensure your success today and also in the future.