The hardest part of having a negative credit history is getting your bank to approve your loan application. With several lenders, however, getting loans these days have come so much easier. With lenders of bad credit loans, you have bigger chances of getting your loan approved, no matter how good or bad your score is, as compared with loans from banks whose one important requirement is for you to have an impressive credit history.
Bad credit loans, as the name implies, are basically short-term advances that you are qualified for even if you have poor credit standing. Lenders, however, will want two important things in order for you to get approved. One is for you to be at least 18 years of age, and the other is for you to have a stable source of income.
Indeed, it is very tempting to take out bad credit loans to use for whatever purposes. But there are some important things to consider before doing so, and here are a few of them.
Bad Credit Loans Have Higher Interest Rates
One of the downsides is their higher interest rates compared to banks. To give you an example, most lenders will charge you $15 for every $100 dollars of loan amount. However, having lenders compete against each other can get you the best and lowest rate possible. These days, there are several lenders that are competing for your attention, and choosing the one that gives you the lowest interest rate, say 3–5% off of the interest rate, may save you a lot.
Bad Credit Loans Have Different Terms
Unlike banks, bad credit loans have different payment terms. Aside from having higher interest rates, they also offer different terms for repayment. Some lenders may require you to pay the loan when your next paycheck comes, while some may also consider your situation and give you longer payment duration, such as a couple of months or so. Note also that lenders may have hidden charges, such as charge for expediting the process of evaluating and granting your loan. That being said, it’s definitely crucial that you read, understand, and then agree to the terms before actually taking one out.
Bad Credit Loans Require No Collateral
Aside from not doing credit check, lenders may also not require collateral, such as your house or car. You will not put your properties at risk, very much unlike banks which require something in return in case you don’t get to pay your loan.
Fix Your Credit Standing
What probably is the most remarkable about taking out bad credit loans, well aside of course from the fast and hassle-free transactions, is the fact that they can actually fix your credit score. By taking out a series of bad credit loans and paying them on time, you are gradually fixing your score. Eventually, you’ll see that by simply taking out bad credit loans, you have improved your credit standing, and taking out loans either from banks or online lenders in the future will be so much easier.