Everyday people file for bankruptcy, go into foreclosure, default on their loans and as a result they ruin their credit or cause serious damage to their score. This forces a lot of people to just lose hope with the idea that their credit cannot recover. But then, there are some who look into options to get their finances back in order. One thing they consider is a bad credit loan. Seeking a bad credit can be somewhat intimidating or confusing so some don’t know whether or not these types of loans will work for them. There are plenty of things to consider before you make a final decision.
What are my finances like?
One of the main things to take into consideration when you are considering a loan is whether or not your current financial situation will allow you to repay a loan. Bad credit loans have higher interest rates than typical loans so you’ll need to account for that when making your decision. If you are in the same position as you were when your credit started going downhill, you might want to consider. Also if you’re still in the process of paying back past debts, might it be wiser to pay those off before taking on more debt responsibilities. Once you’re back on your feet and have stable income a bad credit loan might be more feasible for you.
Do I have collateral?
Taking out a bad credit loan can be pretty pricey especially due to the high interest rates involved with them. You can lessen this financial burden by opting for a secured loan instead of an unsecured one. This will allow you to possibly get a lower interest rate since the loan is backed by collateral. Make sure whatever you’re using for collateral is fully owned by you and that if worse comes to worse and you default, you can afford to lose the collateral.
How bad is my credit?
You may think your credit is bad, but knowing your exact credit score will really help you decide if you even need to consider a bad credit loan. There are plenty of reputable sites that will allow you to see your FICO score for free. If you find out your score is not nearly as bad as you thought, you may be able to seek a normal loan from your bank or credit union while you’re going through a rough time. You may find out your score is 650 or 700 which will leave you with better options other than payday loans or stock loans. And if your score is as bad as you thought then nothing is lost, you are just reassuring what you already knew.
Do I have other options?
You may want to look to see if you have other options for getting the funds you need. If you can borrow money from a friend or family member, you will save on the interest of a bad credit loan. Another thing to consider is cutting back on other expenses or refinancing any loans you already have to help lighten the load. Most people consider these high interest loans as a last resort so look into all of your available options before taking out a bad credit loan.
Bad credit loans can be a great option for people who have had problems in the past and are looking to turn things around. But you may also want to look into your alternatives and make sure you can afford a new loan without causing your credit score to sink lower.