Bad credit loans are a form of lending that is designed to specifically cater to individuals with low credit scores or no credit. These types of loans work in the same way as traditional loans, where the individual borrows money and pays the loan back in fixed monthly installments.
However, the main difference is that they usually come with less stringent eligibility requirements, and successful applicants can access the money within the same day of approval. It is also for this reason that they are often best suited for dealing with financial emergencies like unexpected car repairs and medical bills.
In most cases, you can access bad credit loans from a credit union or take out bad credit loans on this site, as credit services like CocoLoan can often connect you to a wide network of online lenders. And most of them can even offer you a wide range of bad credit loan options to choose from such as payday loans, installment loans, same-day loans, title loans, etc.
However, do keep in mind that because bad credit loans are designed for those with a poor or limited credit history, they often come with short repayment periods, low loan limits, higher interest rates, as well as other extra fees and penalties.
How Do You Get a Bad-Credit Loan?
The first thing you need to do is to run a check on your credit report to learn your credit score. This will provide you with the starting point that you need to effectively compare loan terms online.
Once you are clear on where you stand, it is often a good idea to use an online credit broker like CocoLoan to find the best personal lender that is a match for your credit history, as they have over 100+ loan providers within their network to choose from.
Moreover, Sarah Ross, co-founder of CocoLoan, was quoted as saying that “all the lenders in our network are open to accepting applications from anyone with a less-than-stellar credit history.”
Plus, using their service spares you the need to submit multiple loan applications at once within a short period of time, which can often end up lowering your credit score. Instead, you will only need to fill out one pre-qualification form on their site before it is sent for review by their network of lenders.
What Types Of Bad Credit Loans Are There?
There are two main types of bad credit loans out there: secured and unsecured. To receive a secured loan, you will usually be required to put up some form of collateral, e.g., your car. If you fail to make payments, the lender will then repossess it to recover the money owed.
However, since they reduce the level of risk to the lender, you can often access higher loan amounts, and they are also easier to obtain. A popular example of a secured loan for bad credit is a title loan.
On the other hand, there are unsecured loans for people with bad credit that don’t require you to put up any form of collateral.
However, since this increases the level of risk to the lender, you can usually expect to be offered high-interest rates, lower loan limits, and shorter repayment periods. A popular example of an unsecured loan for bad credit is a payday loan.
How To Compare Bad Credit Lenders?
When shopping around for a bad credit loan and trying to find the right lender, there are a few important things that need to be considered.
For starters, you need to determine what is required for you to qualify for a loan, as every loan provider tends to have their own unique eligibility requirements. For instance, some have a specific minimum credit score, while others require you to have a minimum income level.
You also need to consider what repayment terms they offer. Most bad credit lenders tend to offer loans that span up to a maximum of 72 months, but this can vary depending on the type of loan you seek.
For instance, payday loans are usually due in full by your next payday, while personal loans for bad credit can extend for months or years As such, you should always ask what options they have before you sign.
Aside from that, you also have to ask yourself if you are comfortable enough with the lender. After all, if something unexpected happens during the repayment process, you don’t want to find yourself dealing with an unreasonable lender that is not willing to accommodate your financial situation.
In this respect, it often pays to review the lender’s client testimonials in order to see if they have a good track record. Last, but not least, you have to consider the interest rates that they are offering you.
There are a number of predatory lenders out there that may charge exorbitant interest rates and fees, which will only make repaying your loan more difficult. As such, make sure that you compare their interest rates and repayment terms to narrow down your list until you find a loan provider that is best suited to your budget and requirements.
Things to Look Out for When Applying for a Bad Credit Loan
While bad credit loans can often be a great solution when securing funding from traditional lenders is not an option, it is important that you remain cautious of predatory online lenders.
In this respect, there are a few warning signs that you should always keep an eye out for. The first is that you should never accept any loans offered by US lenders over the phone. This is because it is illegal for companies that carry out business over the phone to provide credit cards or loans.
All credit agreements must be handled in writing, with all the terms of the loan meant to be clearly disclosed to you. Furthermore, it is important that the lender be legally registered in your state, as this indicates that they are a legitimate operation.
In most cases, you can usually confirm if the business is registered by contacting the department of financial regulation for your respective state or reaching out to the office of your state’s attorney general.
In addition, you should always avoid lenders that require you to wire money or pay a specific person directly. Any reputable loan provider will never ask you for money upfront to cover fees or other charges. If they do, then it’s best to avoid them completely, as it is most likely a fraudulent business operation.
Can You Improve Your Credit Using A Bad Credit Loan?
It is possible to improve your credit rating by taking out a bad-credit loan, especially if you have little to no credit history to speak of. However, this largely depends on the loan provider you borrow from because not all bad-credit lenders will usually report payments to the major credit bureaus.
On the flip side, if you fail to repay your bad credit loan on time, there is a very high chance that they will report you to the relevant credit bureaus for defaulting. This can definitely impact your credit score negatively, so you should always make sure that you consistently repay your loans on time, no matter who the lender may be.
