Everyone goes through financial hardships at some point in time. Divorce, layoffs, medical issues, or deaths in the family can be hard to deal with and can often cause you to fall behind on your bills. But when you’re trying to get back on your feet and rebuild your credit after experiencing these financial hardships, typical lenders often won’t approve you for loans and it will be difficult to get approved for anything that requires a credit check. Fortunately, there are special types of loans for people with bad credit that will help you get the money you need and also rebuild your credit.
What are Bad Credit Loans?
Bad credit loans are loans that are granted for people who don’t have ideal credit scores. Often times, people believe that just because they have bad credit there aren’t any options available for them to get personal loans and this often leaves you feeling defeated and hopeless. Bad credit loans are almost like a second chance for people in some regards. While traditional loans rely heavily upon a borrower’s credit to determine approval, bad credit loans are granted more on the basis of the borrower’s ability to repay. So stable employment and decent income will outweigh your low credit score when applying for bad credit loans. There are a variety of different types of bad credit loans available, some of which include:
- Secured Bad Credit Loans: These are loans that are backed by some form of collateral. They typically have the lowest interest rate of any bad credit loan.
- Unsecured Bad Credit Loans: This is probably the most common type of bad credit loan that people seek. They require no collateral, but there are penalties if the borrower defaults on the loan or misses payments. These generally will have one of the highest interest rates for bad credit loans
- Payday Loans: Payday loans are similar to unsecured bad credit loans because they don’t require any type of collateral. The borrower gets money from a lender with the promise that they will repay the loan on their pay day. These loans require the borrower to be currently employed and have proof of steady income
- Installment loans: Installment loans are what the name implies. The loan must be paid back in installments which are outlined in the agreement between the borrower and lender.
- Car Title Loans: These loans require the borrower to use the title to their vehicle as collateral for a loan. The great thing about car title loans is that they allow the borrower to receive a larger loan amount than most bad credit loans. However, if the borrower defaults, the lender can seize their vehicle.
No matter which type of bad credit loan you choose, they all cater to people with bad credit so don’t let your credit score stop you from applying to get the cash you need.
Benefits of Bad Credit Loans
Aside from being available for people with bad credit, bad credit loans have plenty of other great advantages to them.
Low Loan Amounts: The ability to get a loan for as little as $100 from some lenders is great for people who need to pay small bills such as a cell phone, car insurance, or the light bill. Since most banks won’t even entertain a loan application for anything over $1,000, bad credit loans are a great way to get money you need for the little things that have to be paid.
Help You Rebuild Your Credit: Bad credit loans are a great way to help you rebuild your credit and add some positives to your credit history. As long as you are making all of your payments on time or even ahead of time, your credit will begin to improve. Eventually, you’ll be able to apply for credit cards, or traditional loans with lower interest rates. Since you probably won’t qualify for an unsecured credit card, mortgage, or car loan, bad credit loans will be a great option for getting your credit back in shape.
Easy to apply for: Bad credit loans are extremely easy to qualify. Lenders can be found online which gives you the ability to shop around and find the best lender for you. Also, if you’re applying online, the process will be completed very quickly and most lenders offer direct deposit which allows you to get the funds you need usually within 24-48 hours.