Getting approved for a loan with a poor credit score is tight. Lenders typically like to see borrowers with an excellent credit score for the simple fact that they are trustworthy and dependable enough to pay back the loan and not to default.
On the other hand, those with poor credit score have more or less a few hard inquiries in their credit report, low average age in their accounts, and has a significant debt which makes them a high-risk client.
Bad Credit Loans
If you need financial assistance for several reasons, but you have a bad credit score, there are loans for bad credit available for you.
Bad credit loans are just another name for personal loans as they are applicable if you have a credit score of 650 and below.
Just like personal loans, you apply for them in banks, albeit you may have a hard time repaying it because of the high interest that most banks offer. However, an alternative solution can be found online. Online lenders provide a low-interest rate, as well as fast service and easy application.
Debt Consolidation Loans
If you are carrying a significant debt in your accounts, going for consolidation loans is a good decision.
Consolidating your debts in one single account can hurt your credit utilization at first but if you pay your debt in due time, they will credit utilization ratio will significantly go lower. Also, debt consolidation loans have a low APR since as they are supposed to since people apply for them to get a low-interest rate.
Co-sign loans are loans that require you to have a cosigner if you have a poor credit score. The
co-signer will act as an insurance for the lender, which means that when you aren’t able to pay the loan on your own or default, the co-signer will pay the loan for you. Also, if the co-signer has a strong credit, it will land you into loans that have more favorable repayment terms such as having a low APR or a higher borrowing limit.
Variable-rate loans don’t have a low APR per se, but since they are set by benchmark rates, they are considered lower than the APR that other private financial institutions offer. Also, this kind of loan can offer a lower interest rate than fixed-rate loans, but that will change from time to time as the benchmark rate set by the government fluctuates.
Pros of Bad Credit Loans
If you are looking for immediate financial assistance, online bad credit loans are available 24/7 and can give you the money within the day. A few hours after applying for a loan, you can get a response immediately, which is beneficial if you are in a financial emergency.
Bad credit loans also offer a low-interest rate that is usually lower than your credit card rates. Also, depending on the lender you are applying to, the repayment terms are flexible and sometimes even adjustable. Repayment usually lasts for up to five years.
Not to mention that if you always pay on time and repay the loan within the schedule, this will improve your credit score, which makes the approval of your next loan more likely.
Cons of Bad Credit Loans
Most lenders offer a low-interest rate to get more borrowers and profit. Not all of them, though, as some places offer a significant interest rate, which makes the repayment harder, not to mention a massive risk for you and your credit score.
Also, always read the fine print. Check if there are other fees that you have to look out for, such as origination fees, a late fee, or application fee. Also, they might require for collateral like your house or your car, in which they might seize if you aren’t able to pay the lender back.
The most important thing that you need to look out for is the licensing of the lender. The lender that you have applied may not be permitted in your state, which means the whole transaction might be highly illegal. Be sure the lender is licensed in your state before you start enjoying their services, or you might get in trouble with state laws.
There are times when you need to opt for bad credit loans if you are in dire need of money, which is fast and easy. But before diving, make sure to compare your options such as your choices of lenders, the APR they offer, and their borrowing limits. If you have a poor credit score and in need of a loan that is easy to repay with a low APR, you may need the help of bad credit loans.