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Bad credit personal loans
Bad credit personal loans can be described as personal loans that are given to people with bad credit. Fortunately having bad credit, no credit at all, or having a weak one, there are many financial institutions that give such loans.
Some of the financial institutions that give bad credit personal loans are online lenders, credit unions, private lenders, banks etc. Lately, there are several financial institutions providing bad credit personal loans for nearly any purpose such as bad credit for car and truck loans, bad credit home loans and more.
One trait that runs through all bad credit personal loans is that they are very expensive as compared to the usual personal loans from traditional financial institutions.
Many loan providers will charge higher interest rates for bad credit personal loans because of the risk in providing loans to people with bad credit and these high interest rates help to cushion the firms from the risk they take. The characteristics of bad credit personal loans is that they are expensive because of the high interest rate associated with it.
Lenders of bad credit personal loans give the loans at very high interest rates because there is no collateral to these loans and the loans are being given to bad credit borrowers so there must be some security. And the high interest rate is some sort of security attached to the loan to lessen the risk taken by the lenders. Borrowers with good credit history don’t get loans with this kind of high interest because of their good credit history.
How bad credit is accrued
An individual is said to have a bad credit history when he or she has previously taken loans and had difficulty in making repayments on time or not making the repayments at all. With such a borrower when a credit report is pulled on him or her it will show the bad records and this will mean he or she has a bad credit history.
Credit score are numbers that represent the monetary credit value of a person. A credit report of 720 and above is regarded as an excellent one, whiles a credit history of 600 or less is considered as a bad credit score.
A credit score is typically determined based on the following factors
• Payment history
• Outstanding debts
• Length of credit report
• Brand-new credit
• Kinds of credit used
These factors will, however, change from one credit bureau to another. Since each credit bureau has their own parameters they work with it will be different.
With that said, there are still some similarities for all credit bureaus. An individual will be labelled a bad credit report holder if he or she defaults in making repayments, has huge outstanding debts, or have actually previously declared bankruptcy.
Bad credit personal loans offer a ray of hope for borrowers who are experiencing bad credit due to several circumstances beyond their control.
Kinds of bad credit loans
Bad credit personal loans are generally categorized into two
• Protected or secured bad credit personal loans
Guaranteed or protected bad credit personal loans are offered only after the borrower gives consent to render any collateral against the loan being given.
Typically collateral brought as a guarantee for the loan must be equal to the amount being given or more in value to the loan being given.
The collateral ranges from residential or commercial property, automobile or a car which has the same or greater value as the loan amount, a piece of valuable jewelry etc. When compared with unsecured bad credit loans, typically secured bad credit loans are offered at lower interest rates and low month-to-month installments.
• Unprotected or unsecured bad credit personal loans.
On the other hand, unsecured bad credit personal loans are loans which are offered to the borrower without supplying any security or guarantee. As these loans are provided without any security or guarantee, unsecured bad credit personal loans are offered at a much higher interest rate as the risk included is greater.
Most borrowers who opt for this type of loan are aware of the high interest rate before signing the agreements but don’t have an option because they need the money and also their credit history is bad.
Repayment terms of bad credit personal
Typically, most money lenders provide bad credit personal loans for five to twenty five years. However, borrowers are advised to go for a shorter possible duration of repayment because it helps you to decrease the financial concern and complete the repayment duration easily.
What borrowers don’t know is the longer the period or tenure of the loan the more you pay in the long run. By making payments properly or timely you can enhance your credit score and the next time when you look for a loan or credit you can easily get it at a lower interest rate.
This is because you become less risky to the lenders. On the other hand, failing to pay the loan on time as agreed by both the lender and the borrower means the lender can use any legal means or collect the money owed them through a collections agency.
Benefits of bad credit personal loans
Bad credit personal loans also known as high risk loans possess a higher interest rate than common loans, this is so because the borrower with bad credit is a risk to the financial institution. They are one of the easiest and fastest ways to get credit for those with bad credit. Typically traditional banks or financial institutions will hardly or may not grant loans to borrowers with bad credit.
Bad credit personal loansares reliable to fall on when you are hard up since the process is not cumbersome and doesn’t require a lot of paperwork. This makes bad credit personal loans one of the most convenient methods to get credit for those with bad credit. Another major benefit is that bad credit personal loans are an ideal way to enhance the damaged credit score of an individual.
Going for bad credit personal loans and paying on time as per the agreement will improve a borrowers credit score as well as paving the way for a lower interest rate for future loans/credit.
Compared to a housing loan where u are required to use the loan granted specifically for building or procuring a building as you have stated in the agreements. Bad credit personal loans can be used for any and every purpose as desired by the borrower.
What a borrower uses a bad credit personal loans for is not important to the lender, what is important is that the borrower pays back the loan.
Where to find Bad Credit Loans
Are you thinking of where to turn to for bad credit personal loans, think no further because there are several other people like you who need help too. Don’t let bad credit stop you.
Bad credit personal loans are provided by a number of financial institutions as well as alternative lenders and private lenders. Discovering online bad credit personal loans are rather simple, what you need is to make good research online and discover one which matches your requirements or needs.
Borrowers must, however, beware of scammers who are online pretending to be private lenders who will take advantage of your desperation. Remember, getting a bad credit personal loans is the first action towards improving your bad credit ranking.
Going for bad credit personal loans and also delaying in repayment will totally mess your credit up and make it almost impossible to get credit anywhere.
How do bad credit personal loans work?
Once you have bad credit, it automatically means your repayment history on a previous loan is bad because you either delayed or defaulted in paying back the loan completely. This makes lenders very jittery when you apply for bad credit personal loans. They take a very high risk when they lend to you.
Because when they look at your previous loan history it tells them you are a risk to their business and they cannot tell if their money will be returned in repayments or if you will stick to the agreements.
To cushion themselves for the risk they are taking with the bad credit borrowers, lenders of bad credit personal loans charge very high interest rates for bad credit personal loans.
With this arrangement, the lenders are able to make their money back and some more to balance the equation of borrowing to bad credit borrowers. So realistically when they lend to more people the few that default in repaying will not affect them that much since the ones that paid will kind of pay for those that default.
This will help those who have paid back the loans get more loans at a much lower interest rate as well as repair their credit score. Whiles those who keep defaulting will not be able to get a loan which can cause them a lot because no one can determine emergencies occur.
Usually, bad credit personal loans help to solve an emergency financial need, but at the end of the day because of the high interest rate, it sometimes can cause a dent in the borrowers pocket.
The effects of bad credit in the long term
Bad credit is a very bad tag to be placed on anyone. Because as soon as you are tagged as a bad credit borrower you are denied access to a lot of things with regards to credit as well as even searching for a new job or even renting an apartment.
The best thing for a bad credit history borrower to do will be to start the processes to repair his or her credit. This can be done by taking a bad credit personal loan. Lenders want to know if the person or business they are lending to will pay back the money as agreed.
Some lenders will not conduct a credit search on you because that is not their primary focus. These lenders are more concerned with your income and if you can afford to pay back if they lend to you. Even with such lenders, the borrower pays back the loan at a price which is a higher interest rate.
Other lenders do conduct searches on their borrowers before they decide whether to grant the loan. They do this to make sure they know if the borrower is creditworthy or not.
When the searches are done on a borrower and the credit shows that the borrower has a bad credit history, it sends a signal to the lender that the borrower is irresponsible and your application rejected.
In rare cases, if the lender will check your credit history and you have bad credit, they can still give you the loan but it will be at a high interest rate.
Bad credit history usually starts with some of the below
• Errors on your report
Sometimes there are errors that are found on an individual’s report. This is through no fault of the borrower. The information on the report is generated automatically and sometimes these errors occur.
To check these errors every individual is entitled to one free credit report a year to check his or her credit report and make sure all information on it is accurate.
If these errors are not disputed and the credit bureau alerted and made to correct it, it will be on the report and any lender who pulls a report on you will see this error and use that information to make a decision on you.
• Default history
All the loans you have taken and delayed in payments, as well as loans that you have defaulted on, will be on a credit report. Credit card payments too that have been delayed or defaulted on will also be sent to the credit bureau and this will be on your credit report. All of this gives you a bad credit history.
• When there are several hard credit searches
Hard credit searches are searches made by lenders when you apply for credit from them. A one-time hard credit search will not affect your credit score. However, when the searches are quite a lot on your report it tells a different story to the lender.
It gives the impression as a borrower you are moving from lender to lender in search of credit which is unusual unless you have a bad credit history so being rejected by each lender.
• When you use more of your credit than is necessary
When a borrower is given credit he or she is given a limit. If that limit is overstretched it also sends a bad signal to lenders.
How to spot Scams online for bad credit personal loans
There are so many scams online who take advantage of borrowers who are desperate for money. There are some signs that a borrower must look out for and avoid to make sure they don’t get scammed.
• Lenders who have not been registered by the state
Every lender in each state must have been licensed by the state to be considered as legitimate to operate as a lender. If you find lenders who have not been licensed, beware of them. Even if they are licensed but not by the state they are operating from do not do business with them.
It can easily be a scammer who has stolen the documents of a lender to dupe innocent people.
• Beware when the sale phrase is ‘guaranteed approval’
As soon as you see an advertisement for a lender who says guaranteed approval you have to be extra alert. This is because there is no loan which has guaranteed approval when the lender has not gone through your details to be sure you qualify for the loan or not.
The tagline ‘guaranteed approval’ is used mainly by scammers to get more traffic to their sites as well as to get upfront fees from individuals who are desperate for a loan.
• Don’t be rushed into making decisions
When a lender rushes you to make a decision on taking a loan that should give you the red flag. There is no legit lender who will give you pressure to come to a loan and give you a deadline. Borrowers should take note so they don’t fall prey to these scammers.
The rush is to make sure they get your money before you realize you have been scammed, so beware.
Signs to look out for in identifying legitimate lenders
To identify legitimate lenders these are some tips to use to identify them.
• Secured website
When browsing the websites online, there is a padlock on the left side of the bar. When you see that you can be sure the website is secured. The information on these sites is encrypted with one hundred and twenty-eight bit or two hundred and fifty-six-bit security socket layer.
If these two are not found on a website then you can be sure the website is not legit or secured and your information will not be safe.
• Ratings and reviews can be found on their website
Lenders who are legit do not hide anything from their clients. When you visit a lender who is legit you will find reviews from other clients who have used their services. These reviews can either be good or bad, you can then make your decision on whether it will be a lender you will like to do business with.
Ratings of the lender are also seen on the website of a legit lender. A borrower should not take such reviews and ratings lightly since it says a lot about the lender.
• Terms and conditions are clear
When some terms and conditions are hidden from borrowers by a lender it clearly shows that the lender is a predatory lender. A lender who is legit and has come to serve customers as well as make a profit will make sure the terms and conditions are clear.
As a borrower, you have to make sure the loan terms and conditions and all other charges are stated so you can make an informed decision.
Advantages of bad credit personal loans
• Approval is quick
Quick approval with the traditional banks are very rare but very normal with bad credit personal loans. If you are looking for a loan to solve an emergency situation, its best to go for a bad credit personal loans especially if you have a bad credit history.
Apart from how quick approval is, the approval rates are very high for lenders who give bad credit personal loans.
• Amounts borrowed are much higher
As compared to payday loans, bad credit loan lenders give higher amounts. These monies can be used to solve problems that require huge amounts of money. What you have to also know is that the more money is given to you, the more you will pay because of the high interest rate.
• You can rebuild your credit
A bad credit history made it difficult for you to get a loan. So when you get bad credit personal loans, it will be wise to use that to repair your credit score. The opportunity given to you by getting a bad credit loan must not be abused by defaulting in paying back the loan.
• Your credit history is not a problem
Lenders of bad credit personal loans, do not check whether you have a bad or good credit history. What matters to them is your ability to pay back their loans and not your credit history.
Disadvantages of bad credit personal loans
• Interest is very high
When lenders give bad credit personal loans, they do that at very high interest rates because of the risk they take with borrowers with bad credit history who may default on the loans.
• You are vulnerable to scammers and predatory lenders
Because most of these lenders are found online, the possibility of getting hooked to scammers and predatory lenders is high. They come with very enticing loans, and if you don’t do your research properly you can easily be convinced to use their services.
Borrowers must be extremely careful not to fall prey to these lenders. Because instead of getting out of the bad situation you are in with a bad credit personal loans, you will rather get in deeper trouble.
• You can get hooked to the cycle of borrowing
When you take bad credit personal loans, you should make it a priority to pay back diligently. If you do this you can get out of the bad credit history group gradually. If not then you will be rather getting yourself in a cycle of borrowing to repay your debt all the time.
Bad credit personal loans are good for bad credit history borrowers because it helps them get money to solve their financial problems as well as an opportunity to repair their bad credit history.
Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. Our lenders lend from $500-$5,000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.