Bad Credit Statistics
Online Loan Facts for Bad Credit
Only a few years ago it seemed, no one with a dent in their credit stood a chance of getting a loan for any amount of money. Since that time, competition in online lending has encouraged the industry to relax its restrictive credit requirements and open up credit for persons with bad credit.
However, loans of this type don’t offer the best interest rates, but, access to a higher number of lenders is now a reality. Thanks to the easing of credit requirements and a robust market of subprime borrowers matched to lenders, established now is a new burgeoning market sector and exploding.
Say No to Payday Loans
Whether a lack of restraint in taking out loans or other factors prevented you from making on-time payments, the result is a low credit score. That low score prevents you from receiving favorable interest rates on loans, creating a situation that requires you to explore other, less desirable options.
The pool of lenders willing to grant credit to high-risk borrowers with bad credit has increased in the last ten years, which can help get you out of a bad financial situation. Credit approval and income verification still present a hurdle for some applicants, but more people find themselves able to qualify.
For those not as fortunate may become more desperate and go the payday loan route, which puts people into a situation with exorbitant interest rates that can lead to a perpetual loan-renewing cycle to pay the interest from the previous one or two week period.
Pay Less Interest With Installment Loans
Instead of paying rollover fees for a payday loan, an installment loan offers a lower interest rate and regular monthly payments that don’t change. Bad credit installment loans are available and depend on the type you receive.
An unsecured loan requires a contract and a promise to pay, but no collateral or security to cover the balance of the loan in a case of default. The lender’s only recourse to recover the loan is through a collection agency or the court system.
A secured loan attaches an item of property such as a car or a home to the loan contract as collateral. If the loan goes into default, they return the security to the lender and sold to help cover losses and repay all or part of the loan. The lender can sue you to collect any balance remaining after the sale of the loan collateral.
Use an Online Lending Portal
Finding a suitable bad credit loan can take time and could end in frustration. Growing in popularity are online lending portals. A function of portals is locating lenders willing to loan money to you based on your needs.
Depending on the lender, all types of loans in the $500 to $5,000 range are available, and amounts vary by lender. Interest rates differ, ranging from around 6% to a high of 36%. Lending portals have their place for people in need of personal, business, and car loans that otherwise might be out of reach.
Using a portal to find a lender to grant credit to you could be excellent news when other attempts at finding credit fail because of a low credit score.
Better Options for Loans
We’ll discuss a few options to secure a loan and because they’re better than loans charging very high interest, the trade-off is they’re harder to get. Payday alternative loans available at some credit unions are more affordable with lower interest rates and shorter repayment term lengths.
Payday alternative loans interest rates max out at 28% which keeps payments reasonable in comparison, and loan amounts up to $1,000 with repayment terms from one to six months makes the loan manageable and less of a burden.
One type of loan we haven’t discussed is online loans from peer-to-peer lenders made up of individual investors willing to fund the loan. As expected, a better credit score gets you a better interest rate, but much lower than a payday loan. Expect to search longer and harder for this loan, but lower interest rates make the effort worthwhile.
Loans with No Hard Credit Check
Applying for a bad credit loan involves a hard credit check that looks at everything in your financial life, which is one reason they’re hard to get. They lay bare your credit score and financial history, and most times, the credit decision isn’t in your favor.
Fortunately, an easier way to receive a loan is possible from some non-traditional lenders. These lenders perform a soft credit check without affecting your FICO score. Instead of dissecting your entire financial life as with a hard credit check, a soft pull as they call it looks at the whole picture of your situation including employment, financial history, and your ability to repay the loan.