Cool Facts About Bad Credit Loans – Never Ask Anyone Else Again
So you don’t have the brightest financial past in the world. The reality of the situation is that you are not the only one who has ever had problems with money. The good news is that there are plenty of things you can do to put yourself back on your feet. Bad credit loans are often sought out by those who do not have the type of credit needed to obtain a normal loan. While these are great options for those who can’t get otherwise get the money they need, there are some things you should be aware of before you start applying.
You’ll Need to Dig for the Right Company
No two companies offering bad credit loans are alike. While banks offering this type of loan are easy to locate, you’re going to find that they all have different terms, conditions, and stipulations. Make sure you spend some time searching the internet and comparing options. While many banks charge application fees, there is no reason for you to pay a fee for a quote before you commit. Stay away from lending institutions who require upfront fees before giving you quotes or terms. They’ll end up costing you more money in the end.
The Minimum Requirements Don’t Change
Every lending institution has a series of minimum requirements you must meet before you can obtain a loan. The most common are a steady source of income and proof of a stable residence. Showing you have a stable residence helps banks to see you are less likely to disappear on them. Proof of income proves you’ll be able to make the minimum payments on your loan.
While you’ll always run into these two stipulations, you’ll find other banks with additional requirements. Some will require you to have a land line (not just a cell phone). Others will require proof that you have an actual bank account.
You’ll Pay Higher Interest Rates
The bad news is that you are likely to pay a higher interest rate with a bad credit loan than you would if you had a better credit rating. Paying a higher interest rate is simply the price you’ll have to pay for ending up in the financial situation you’re currently in. On the upside, many companies will negotiate interest rates after time. You may be able to obtain a loan, make timely payment for 6-12 months, and then ask for an adjustment. If you have a good payment history, your bank may comply.
Another way to go about obtaining a lower interest rate is by giving a large down payment on your loan. It may seem counterproductive to obtain a loan only to give a payment right upfront, but the larger your upfront payment, the lower your interest rates may be. Lenders are more willing to give lower interest rates to those with poor credit histories if they can prove they are financially responsible.
Secured vs Unsecured Loans
Your final option for obtaining a bad credit loan is to seek out secured loans instead of unsecured loans. Unsecured loans are the ones you’re most familiar with – where a bank lends you money and only expects repayment plus interest in return. Secured loans work differently. You may have to give your creditor a deposit to be held against your loan (and returned if you pay off the loan), or you may have to promise some other type of collateral (like your house or your car). If you default on your loan payments, you will lose whatever you promised as collateral. Lenders are more willing to give out secured loans to those with questionable credit because they will be better able to make up for their losses by selling your property if you do not pay.
Don’t forget that no two banks are alike. Make sure you ask your potential lenders as much as you can about the terms of your bad credit loan. The more educated you are about the terms, interest rates, fees, and any possible penalties, the less likely you are to have problems later on down the line.