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Loans for bad credit
Individuals begin to search for loans for bad credit when through no fault of theirs they are not able to manage their credit well and end up with bad credit. The bad news is: you may not have access to loans when you most need them. The good news is: when you search around you will find lenders giving loans for bad credit individuals.
Bad credit lenders have loans for those with bad, weak or no credit. One thing to note though is that in the bid to get loans for bad credit you will find out that it has a higher interest rate. This is because a lender considers those seeking for loans with bad credit as a risk. The fear is that they may not be able to pay the loans back.
What then is good credit and bad credit?
A credit score is a currency in the world of borrowing. This score limit differs from lender to lender and country to country. Without it, no lender will be able to successfully transact business with you. Generally, according to Equifax, TransUnion, and Experian, the credit score ranges from 300 – 900.
Good credit in some places is when your credit score is above 630. Good credit also means that your payment habits on credit cards and loans, for example, are all prompt and not been skipped or delayed in any way.
Your credit utilization ratio also should not have exceeded the minimum amount. Additionally, a good credit score is when you have also not filed for bankruptcy.
Bad credit is when you have defaulted on loans or had too many credit inquiries done on you. It also means your score is below the acceptable level of the lender. Bad credit is when your score is below the mark. In some places, 650 or 630 is considered as bad credit.
When this happens, lenders may be a bit reluctant to grant you loans because of the uncertainty as to whether you will pay back or not. Lenders are in the business to make a profit and will do what is in their best interest to avoid losses.
Loans for bad credit: does credit score really matter?
A credit score is what lenders base their decision on to grant loans to people. It helps them to know whether you are likely to repay the loan you are given. Credit score matters because it enables the lender to know how much risk you carry.
Credit scores help the lender to know whether you qualify for a loan. Without it, lenders cannot determine whether you are in for loans for bad credit or other types of loans. Credit scores matter because it gives you access to loans when you need them.
Credit scores are more like the results or grades that appear on your school report. Instead of the grades, your credit activity is what is accumulated as the credit score.
Your credit score happens to be part of any new financial step that you want to take. If you want a new house or you want to get a new car and don’t have the cash at hand to pay for it, loans are the next option. This will, however, require your credit score before you can get access to the funds.
However, it is also the case that lenders do not only look at credit scores to offer loans to people. They also consider details from your credit report in general such as the types of debt you have handled in the past, the age of these types of debt taken and the total amount of debt you have.
Your debt-to-income ratio may also be another factor when lenders want to check your credit score before giving you a loan.
“Loans for bad credit” as a famous search word
Many people are looking for “loans for bad credit” in their daily searches online. The crux of the matter is, daily expenses befall us and these expenses do not wait for anyone to be financially ready.
If you don’t have the means to cater for them from savings or other emergency funds that you may have then loans for bad credit will be an important search word for you. You will be looking for a lender who will be able to help you out of your financial situation.
The 4 things to look out for when it comes to loans for bad credit
The fact that you have bad credit and experiencing a lot of possible “no’s” does not mean you should jump at the nearest lender who says “yes”. There are things to consider before going in for a bad credit loan.
• The Annual percentage rate (APR)
When you are looking for loans for bad credit one of the things to consider is the APR. This refers to the full cost of the loan over the course of a year. This differs from the interest rate which only deals with the interest charged on a loan.
The APR shows you how much you will actually pay for the loan which includes the interest plus fees. It should not be too high that you cannot afford. An APR of about 520% is not a bit high – it is very high. If the loan is too costly, you are likely to default on it and this can affect your credit score especially if you are already having bad credit.
All loans do come with some fees and loans for bad credit is no exception. Lenders do give out loans to people with bad credit and you would have to pay some fees. Pre origination fees and pre-payment penalties are charged. This does not apply for all lenders though, but it will be good to find out before you go in for the loan.
The origination fee is a charge that comes when the loan is issued at first and is deducted from the principal. Prepayment penalties, on the other hand, are for paying your loan off early.
Prepayment penalties are however becoming very uncommon with many lenders. In some countries, it’s illegal to charge prepayment fees. You would have to read the terms and conditions to be sure of the lender’s requirements.
You should choose lenders that are interested in checking your credit even if it’s not good.
• Length of Term
This refers to the length of time you have until the loan is repaid. If you’re going in for loans with bad credit, you should be guided on the time that you have to pay back the loan because default will definitely affect your credit score.
The length of the term of the loan is crucial because it goes along with the APR to know how much loan payments you are to make toward the loan. Depending on the type of loan it is, the term of payment will be different.
Installment type of loans will have their payments in a fixed amount for a period. Revolving loans, on the other hand, have payments depending on how much credit was used. You should negotiate for terms that you will be comfortable with so that you do not default on the loans you take.
• Fixed vs variable rates
Loans for people with bad credit are not exempted from the rates. Like all other loans, there are rates that are charged on them. You should find out if you are getting a fixed rate or variable rate for the loan that you are taking.
A fixed rate will not change over a period of time. A variable rate on a loan means the rate on the loan can change at any time usually from lower to usually higher.
To sum up
Many individuals who have encountered credit score problems are of the fear that they may not get loans for bad credit that will suit their needs. It will only require searching for the lender that can provide you with the loan you need in spite of your bad credit.
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.You can borrow up to $20000. 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.