You never know when disaster is going to strike. Suddenly, you owe hundreds of dollars to the car mechanic for an emergency repair, or you need to cover a visit to the ER.
Or maybe the situation is just the opposite. When opportunity knocks, there may also be a limited time to procure the financial resources needed to fund a start-up or make a move across the country to a new job.
There was a time when it was difficult to qualify for a competitive loan with bad credit history. In fact, it was hard not to get scammed outright. But that is no longer the case today. In a time when more than half of Americans have subprime credit scores, there is a major demand for loans for bad credit.
Online and offline lenders have risen to meet that need with a wide selection of bad credit personal loans. Consumers can apply for these loans quickly and easily, receiving the help they need for life’s most pressing financial needs.
A bad credit loan is a loan aimed at consumers who have credit scores under 630. For reference, here are the different FICO score ranges:
Both subprime and poor credit are considered “bad” credit. Sometimes fair credit is known as “average” credit, while great credit may also be considered “excellent” credit. Note that the exact ranges are not fixed either; some lenders may denote slightly different ranges. See the table below for an example.
When applying for bad credit personal loans, what kinds of interest rates can borrowers expect? Here are estimated APRs.
|Credit Score||Range||Estimated APR|
|Excellent||850 – 720||13.9%|
|Good||719 – 690||18.0%|
|Average||689 – 630||21.8%|
|Bad||629 – 300||27.2%|
Those with really low scores may be denied a loan altogether in some cases.
The estimated APR for loans for people with bad credit is far in excess of that for those with good or excellent credit. The reason for this is simple. People with low credit scores do not have a perfect financial history. They may have defaulted on previous loans, or paid their bills late. That means that lenders are taking on a higher risk by loaning these borrowers money.
The high interest on bad credit loans helps to compensate for losses when borrowers default. In some cases, loans may also be “secured.” This means that they are tied to collateral. This is an object of value such as a vehicle. If the customer defaults on the loan, the lender has the right to seize the collateral to compensate for the loss.
Once you are aware of these possible scams, it is relatively easy to steer clear of them. Do your research and use your common sense.
Nowadays, borrowers no longer need to walk into a brick-and-mortar location to apply for a bad credit loan. They may apply for online personal loans from the comfort of home. The benefits of applying for a bad credit loan online include:
Wondering if a bad credit loan may be right for you? This type of loan is an ideal fit for the following:
Bad credit loans are only suitable for borrowers who have the means to make timely payments in full on them. Doing this will build credit. Missing payments will damage credit more.
Loans for bad credit offer the following advantages:
A bad credit personal loan is yours to do with as you wish. That being said, some uses are more suitable than others. A personal loan is not a replacement for a reliable income. It should not be used to pay regular bills except in situations which you know are temporary. Here are some appropriate ways to use bad credit personal loans:
Remember, if there is a way to cover expenses without taking out a loan, that is usually the best course of action.
There are a number of different types of loans for people with bad credit. We have already discussed secured vs. unsecured loans. Now let’s look at other categories.
We have already talked about red flags to avoid when applying for a bad credit loan. But how do you recognize a good loan offer? Here is what to look for:
Taking a little extra time to compare loan options can help borrowers stay safe and avoid scams. It can also save money in terms of interest and fees.
Paying off a bad credit loan on time and in full can boost credit. Here are some other steps to take to improve your score and take more control of your financial life:
Here at PaydayAllDay, we make it simple to apply for a bad credit loan. Why go with us instead of one of our competitors?
Ready to apply? You could be just minutes away from getting the financial help you need. Just fill out the easy bad credit loan application form below, and we will connect you with top loan offers!