There are often situations in life when you have a bad credit situation. And just in those moments, there are circumstances wherein you would need some extra cash – and it needs to be fast. In those times, people often unwillingly accept the terms of personal loan lenders, even though they know they are about to pay the highest rate possible. However, there are ways to make this situation a bit easier and safer – you just need to know everything about the process. Here are the most important pieces of information about bad credit loans, and most importantly – tips on how to safely take them.
A bit about bad credit loans
What do you know about bad credit loans? If it’s not much – that’s great! That means you haven’t needed them until now. Bad credit loans are offered to people who have either very weak credit chances or no options at all. This is usually the case when your FICO score is below 650.
Be sure to know your FICO score before you start chasing loans – you can find out that info in your credit card statement or calculate it online.
The advantages of bad credit loans – they are an ‘easy’ way to get cash fast when you need it the most. Next, you can get a significant amount of money without having your credit history inspected.
On the other hand, there are some important disadvantages to taking a bad credit loan:
- they tend to be very expensive – the interest rates are generally very high.
- it’s a risky business – there are many bad lenders you want to stay away from.
That’s why being prepared for a bad credit loan will help you get some cash quickly and without any problems. Even though the word ‘debt’ can seem terrifying – it doesn’t need to be. Be prepared for taking bad credit loans and avoid problems.
Avoid the loan if there’s a chance
Since bad credit loans can be pretty risky for your finances, if possible, find a way to avoid them. For example, if you are moving to another house, make sure to save what you can during the moving process. Declutter your home, sell what you don’t need and DIY the things you can.
Also, find a trustworthy moving company, so you move your household or office goods with ease and no risks of fraud or unexpected costs. Be sure to plan the whole process and you won’t need a loan after all.
How to look for a bad credit loan – the best way possible
1. Find a reputable loan lender
The most important thing about bad credit loans is to go through the process as safely as possible. That’s why you need to make sure you’re dealing with a trustworthy lender.
The best way is to get recommendations from the people you trust, like your family or friends. There are many financial institutions that offer these types of loans, so be sure to know where to look.
Banks, online lenders, credit unions, etc. – there is a variety of choices so take your time and browse their offers so you can pick what’s best for you.
You can check if there are any complaints on BBB’s consumer complaint database so you are sure you don’t pick a risky lender. Don’t go with the first thing you come across but check the lender thoroughly.
2. Pick the best deal there is
Once you pick your favourite choices (have at least three), it’s important to compare the deals. As you may already know, the offers can vary significantly and depend on the financial institution.
Here are the things to consider when comparing different bad credit loan offers:
- loan repayment terms – don’t be fooled by the longer/shorter repayment time. The longer that period is, the higher the interest rate you’ll have to pay.
- amount of monthly payment – be sure to get a loan that has a monthly payment you can actually deal with on a monthly basis. Don’t take more than you can afford.
- APR – annual percentage rate is one of the most important things on the list. Be sure to clearly understand the total amount of money you need to pay each year – with all the fees included.
- additional fees – be sure to ask about the additional fees like the loan origination fee, so you can precisely calculate your finances.
Once you compare the offers considering these items from the list, you should be able to pick the offer that suits your needs the best.
Make your credit reports positive
No, you can’t make these things up, but not enough credit information can make your credit score go lower than it actually is.
That’s why you should make sure you complete your credit information, especially with the positive details.
This could be as ‘simple’ as paying your bills on time since this info can also be calculated as positive into your credit score. If you are financially responsible and run your finances on your own, lenders will see you as a capable credit borrower.
It’s not always the case that bad credit loan borrowers have enough time to get the money. However, if you are ‘a lucky one’, and you’re not in such a hurry, it’s a wise thing to wait for a bit.
First of all, there are ways to save some money and make your report better – take a look at our tips and tricks to cut off your expenses easily.
Second, some negative information on your credit is going to disappear after a while. For example, credit reports hold onto judgments, delinquencies, etc. for seven years, whereas bankruptcies are left for ten years in the report. Waiting for a while may help you get a better report and get a loan more easily. Waiting before taking bad credit loans is always a good idea – if your finances let you.
Take care of your finances carefully
The key to running a successful budget is to be wise and not to make harsh decisions. If you run a small business, read our finance hacks so you could manage your money safely and avoid needing a bad credit loan in the first place.
Take secure, measured steps so even if you need a loan, you make sure to get the least destructive option. Even if you don’t get approved, there are other options for borrowing money.
However, you need to be aware of the consequences and high rates you’ll have to pay in the shortest time frames. So be sure to avoid them in any way possible.