When you are faced with a financial crisis, personal loans can often be a lifesaver but if you have bad credit, then it can often be very difficult to secure approval from a bank or credit union.
If you should find yourself in such a situation, you will be relieved to learn that there are a number of online lenders out there that are open to working with borrowers with a less-than-stellar credit history.
For those unfamiliar, a bad credit loan is a form of lending designed to cater specifically to borrowers with poor credit scores. They can be accessed and used to cover a wide range of expenses such as financial emergencies, debt consolidation, medical bills, etc.
These loans also work similarly to personal loans in that they have a fixed interest rate and are meant to be repaid in fixed monthly installments. You can often find a lender with the help of a credit broker site like iPaydayLoans that allows borrowers to browse some best bad credit loan options on its page.
Is It A Good Idea To Borrow Bad Credit Loans?
Bad credit loans can be useful when you are in need of urgent funding but all other financial avenues are closed to you. However, it is important to keep in mind that these loans often come with extremely high-interest rates and fees. Also, while it is completely legal to apply for these loans, the problem is that there are a number of predatory lenders out there that may seek to take advantage of you.
Naturally, this raises the question, how can you find a legitimate bad credit lender? Well, whenever you are weighing out your options, there are a few important factors that you can use to help determine if a potential loan provider is a safe choice.
Is the bad credit lender reputable? – The lender needs to have been registered to conduct business in your state, which means verifying with your state attorney general to ensure that they are a legitimate business. You should also check out online reviews and past client testimonials to assess their quality of service.
Do they charge prepayment penalties? – There are some bad credit lenders that tend to charge penalty fees for repaying your loan early. If you find a lender that does this, you should avoid them because it is often an attempt to extend the loan for as long as possible and collect as much interest as they can.
How reasonable are the interest rates and terms? – While it is a fact that bad credit loans typically come with high-interest rates, it is important to find a lender that offers competitive rates. In this respect, you can learn more about how to accomplish this by reading the articles written by Jean Santiago from iPaydayLoans.
What Are the Benefits of Bad Credit Loans?
Bad credit loans come with a number of advantages that are worth considering should you be turned away by traditional lenders like banks or credit unions. Some of these benefits include:
Lax eligibility requirements: While personal loans from traditional lenders often come with strict eligibility requirements, bad credit loans are typically accessible to borrowers of all credit types. This is because most lenders will look at other factors such as your income level and debt-to-income ratio before making a lending decision.
Fast funding: Most bad credit lenders are known to offer fast loan processing with borrowers able to apply for funding online, get a loan decision within the same day and, if approved, receive the funds as soon as the next business day.
Boost credit rating: While it is uncommon, there are some bad credit lenders that report on-time payments to the relevant credit bureaus. And since your payment history accounts for a significant portion of the credit-scoring equation, this means that borrowing a bad credit loan can potentially help you to improve your credit rating.
Are There Any Downsides of Bad Credit Loans?
While these types of loans have their perks, there are also a number of downsides to consider before you decide to apply for one. These include:
High-interest rates: As mentioned before, bad credit loans for bad credit often come with high-interest rates, compared to traditional loans. This means that the monthly payments you will need to make may prove difficult to manage and can potentially result in default.
Expensive fees: A number of bad credit lenders often charge a wide variety of fees that could significantly increase the already steep cost of the loan. Some of these extra costs can often include origination fees, prepayment fees, late payment fees, etc.
Tips For Repaying Bad Credit Loans On Time
If you were to secure approval for a bad credit loan, whether it is a secured or unsecured one, you need to make consistent monthly payments to ensure that you eliminate that debt in full. However, given that bad credit loans can often be expensive, this often makes them difficult to repay for many borrowers.
In this regard, it often helps to set up an automatic payment plan that ensures your loan repayments will be deducted on time and without fail each month. This will reduce the risk of a possible default and help you to avoid being charged high late payment fees or worse, being reported to the major credit bureaus.
Aside from that, you should also work to create a budget beforehand that cuts down any unnecessary spending and effectively frees up money to quickly pay off your debts.
Best Bad Credit Loan Alternatives
In the event that you decide not to borrow bad credit loans or discover that you will be unable to make the required payments on time, there are still other options that are worth considering. These often include:
0% Intro APR Credit Card: These credit cards are a great alternative because they allow you to access a line of credit without having to pay any interest rates for a limited period. This can often last up to about 15 months but after that, any remaining balance will accrue interest, so you need to repay the entire amount within that introductory period.
Borrow from a friend or relative: While this option is often uncomfortable, it is often the most viable one to consider. You can ask a relative or friend to lend you the money you need and the benefit of this is that they may not only offer flexible repayment terms but also not charge you any interest rate. However, it is vital that you uphold your end of the bargain, otherwise, you risk damaging the relationship.
Bad credit loans are a viable loan option to consider but they can only be considered a safe line of credit if you are confident in your ability to make your repayments on time. After all, they often come with high-interest rates and a number of lenders tend to charge hidden fees that could potentially raise your borrowing costs even further.
In this respect, you should make use of an online loan broker service like iPaydayLoans. The site will allow you to instantly compare multiple loan options from different lenders, thereby making it easier for you to secure the right deal that comes with reasonable terms and an affordable monthly payment.
Also Read: A Review of WeLoans.