There are a variety of reasons why people take out personal loans. Medical bills, debt consolidation, car repairs, student debt, and large purchases are just a few examples of unexpected expenses that many people encounter every day. In an ideal world, we would all have an emergency fund or savings account to help with these bills. But the reality is, 28 percent of Americans have no emergency savings for unexpected expenses.
When you have bad credit and need a loan, you might have a hard time finding one with favorable terms. You’ll generally need a minimum rating above 600 to get approved for an unsecured personal loan.
However, there are certain lending options that specialize in loans for people who can’ t make the minimum credit score.
In this article we’ll cover the pro’s and con’s of each type.
Depending on the type of personal loan you choose, the option could end up being safer and saving you money on interest rates in the long run.
But what if you need fast cash and you have a horrible credit history? It will likely mean that you have fewer lending options to choose from for a personal loan. These options are sometimes referred to as “24 hour emergency loans” and interest rate will go up.
In order to understand poor credit, you’ll first need to know what a credit score is and how it is calculated. In the simplest terms, a credit score is a three-digit number which tells lenders how trustworthy you are when you borrow money.
This score is calculated by several bureaus that review your payment history, your credit accounts, and your level of debt. The more trustworthy you are when you borrow, the better your credit history is. The better the chances for approval, and with higher your credit score the more options with lower APRs you’ll have for personal loans and credit.
There are a few different types of credit scores out there. One is called your FICO score, which is calculated by Fair, Isaac and Company. A FICO score will range from 300 to 850, with anything below 580 being considered low. The other common credit check is called VantageScore, which also ranges between 300 and 850. With a VantageScore, any credit check below 600 is considered a poor credit score.
It’s important to build and keep track of all your credit scores so you know whether you have good, fair or poor credit, and how you’ll be assessed by lenders when you’re seeking a personal loan. You’ll also be able to contact credit bureaus to fix errors in your credit score report if you find any.
There are two basic types of personal loans: secured and unsecured.
A secured loan is one that requires you to offer up collateral in order to get the loan. This means that if you aren’t able to pay it back, the lender will keep your collateral in order to recoup their loss. Common secured loans include title loans and pawn shop loans. Secured loans usually have lower APRs as well.
An unsecured loan is just the opposite, in that the lender doesn’t require any collateral in order to provide a loan. Common unsecured loans include payday, installment and bank loans.
While it’s not possible to get 100% guaranteed approval when it comes to online loans for bad credit, it’s typically easier to get secured online loans because the lender has a way to get their money back if you can’t repay the loan. That being said, it’s also riskier for the borrower, as they may be leading to the loss of their collateral. Unsecured loans may end up having higher interest rates and a more selective application process, as an added layer of security for the lender.
Payday lenders usually charge interest of $15-$20 for every $100 borrowed. Calculated on an annual percentage rate basis. Similarly to credit cards, mortgages, auto loans, etc. APR can range from 391% to more than 521% for payday loans.
Typically, they are required to be paid back in a very short amount of time, usually within two weeks or on your next payday, hence the name.
Payday loans are an expensive option for people looking for a short-term loan, but could be a better alternative to a secured loan (like a title loan) because you won’t lose your vehicle if you aren’t able to repay the amount borrowed.
Carrying high APRs, but may be a valid option when comparing them to other emergency loans. The important thing to remember is to only take out a payday loan if you’re sure you can pay it off in time, as there will likely be additional fees associated with late payment or defaulting on the loan.
Another example of a so-called “bad credit loan” would be a title loan. This is a secured loan that requires the borrower to offer up the title to their vehicle in exchange for a small-dollar high interest rate loan.
Because this is a secured loan, the lender has the right to take your vehicle if you aren’t able to repay the money. Many people would consider this too risky even for people with bad credit. Title loans also have generally high APR’s even though they’re secured.
While other bad credit loans may lead to a cycle of debt for the borrower, this one could end up being even more disruptive by leaving you stranded without a car to get where you need to go.
This loan option is very similar to a payday loan, with some minor differences. Some online payday lenders may offer this, in addition to their normal payday and hard money loans.
With a cash advance loan, you write a check dated for your next payday. The check will be for the amount you’re borrowing, plus any interest and additional fees. The lender then gives you the agreed upon amount, and on your next payday they will deposit your check to recoup their money. This can be an expensive option for low credit loans. But if it’s between this and risking your vehicle, it may be a safer alternative.
When it comes to having poor credit, an installment type loan may be the best option if you qualify for one.
An installment loan is an unsecured loan that can range from a few hundred dollars, all the way up to a few thousand. These loans typically have lower APR’s than other emergency loans. They’re also more manageable as repayment is spread out over a much longer time period than payday, title, or cash advance loans. If you’re considering an installment loan, you’ll likely need to have a slightly higher credit score than you would for a payday or title loan.
The APR is usually fixed, which means that it’s a set rate that won’t change throughout the life of the loan. This, along with the longer repayment period, makes installments a more attractive option for those with bad credit. While payday and other short-term loans might need to be repaid within a matter of weeks, installments are usually paid back over several months or even up to a year or more.
Installment loans are an example of a bad credit loan that may potentially help customers build their score over time and qualify for more premium loan options in the future.
Generally, CreditNinja offers unsecured loans up to $3,500. However, the amount you’re offered if approved will vary based on your specific qualifications, as well as the regulations in the state where you live.
With CreditNinja, once you complete the entire application and submit the necessary information, you should receive a decision right away.
Applying for a new loan may mean that the lender or provider will perform a credit check to make sure you’re eligible for the product. If they perform a hard credit check then your credit may be impacted, whereas a soft check won’t affect your credit.
CreditNinja offers quick and reliable personal loans for borrowers in need. The entire process is online, from the application to funding, and even repayment. Apply today for a CreditNinja personal loan, get a decision right away, and get the cash you need to get your life back on track.
Your credit score can be improved by making payments on time, paying down your current debts, and lowering your credit card usage. For more help, you may consider reaching out to a credit counselor or debt management company.
CreditNinja personal loans are “unsecured,” meaning we don’t require borrowers to provide collateral in order to qualify. Approval will be based on an applicant’s credit history, income, and ability to repay the loan, among other factors.
While there may be lenders that can work with you if you’re unemployed, it is unlikely that you’ll be approved without steady income. Ultimately, lenders need to know you’re able to repay the loan before they issue you one.
Living life and not making a minimum credit score even for a credit card, might be quite expensive. That means that focusing on building your credit should be a top priority. While some short term emergency loans may seem like a good option by promising “fast cash now” or “money when you need it,” you should make sure that you have the ability to repay before taking one.
Building your credit takes patience, hard work, and a little bit of financial know-how. It’s all about making the best decision for the situation you’re currently in. Find a small loan for bad credit that you can pay back and do your best to make on-time payments to build your credit score. Then you may be able to qualify for a better option like an installment or bank loan next time.
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