Apart from affecting your ability to borrow money, things like your chances of renting an apartment or securing a job can also be influenced by bad credit. When you have bad credit, securing loans can become difficult. Fortunately, if you need additional cash to pay for car repairs, home improvement, a family emergence or unexpected bills, a lender that specializes in providing convenient and quick bad credit loans can help you.
How Do Bad Credit Personal Loans Work?
Generally if you have a bad credit history, you will have fewer options to finance than anyone who has good credit. Unlike those who have strong credit, lenders who offer you a personal loan despite your bad credit will most likely charge higher interest rates. However, a bad credit loan will not only serve the purpose of helping you acquire the cash that you need, but will also help you rebuild your credit as well. Once you manage to make timely payments in full for a couple of months, not only will your credit score increase, your lender might also lower the interest rate being charged.
If you are looking forward to achieving financing in the form of a bad credit personal loan, then secured and unsecured loans are the two main categories of loan types that you can borrow. Getting approved for unsecured bad credit personal loans can be more difficult. Typically, the lender will analyze your credit history more thoroughly since your signature on the loan agreement is the only thing that backs/guarantees that you will repay the loan in a timely manner. These types of loans are commonly referred to as personal loans and terms of 1 to 6 years are usually associated with them, along with various interest rates that range from 10% to 20%.
On the other hand, getting approved secured bad credit personal loans tends to be easier because you will receive the loan against some type of personal property that will serve as collateral, as security for the lender. This means that if you do not repay your loan on time as committed, the lender will have the right to take that personal property from you. However, if you manage to repay the loan in full, not only will your credit improve, you will also maintain possession of your personal property too.
For Example: If you wish to borrow a personal loan of $10,000 and you have bad credit, and if the lender charges a 10% “APR” and the loan term is 60 months. This means that you will have to pay $212 every month, which means that you will be paying $2,748 of interest on the loan amount, and total amount you will repay will add up to $12,748 .
APR refers to the Annual Percentage Rate, which is the interest rate a lender will charge over a certain period of time. The APR can be divided by the loan balance and then divided by 12 to determine how much you will have to pay every month. You can also compare bad credit personal loan offers by understanding how the cost of the loan will be affected by interest rates, so that you can find a bad credit personal loan with the lowest interest rates and the right terms.
Frequently Asked Questions About Bad Credit Personal Loans
Should you borrow from a direct lender or referral service?
A referral service is a third party. A direct lender, as the name suggests, will directly provide you with the amount you wish to borrow if you are approved, without the involvement of a third party. This means that the APR will still be reasonable, unlike if you look for a lender through a referral service.
What can you use a bad credit personal loan for?
A bad credit personal loan is for your own personal use, so you can use it for virtually anything. You can make home improvements or take a vacation, or anything else, depending on your needs.
Will you get approved for a personal loan with a horrible credit?
Indeed, if you specially agree to borrow from lenders who specialize in lending personal loans to consumers with bad credit, then they will definitely approve you.
Will you get a bad credit personal loan with a high ratio of debt-to-income?
Yes, no matter how high your debt, you will get approved, as stated above.
How long will it take until your loan is approved?
Usually, once you have submitted your application, you will most likely be contacted within 24 hours. Keep in mind that with online lenders, you can apply 24/7, 365 days of the year.
Is Borrowing Bad Credit Loans A Wise Decision?
The cost of borrowing a bad credit loan might be high, if you direly need to meet certain financial goals and your bad credit is prevent you from acquiring the funds you need, then borrowing such a loan is your only option. Simply assess your financial situation, and if borrowing a bad credit personal loan makes sense, then go for it.