bad loan

The 411 on Bad Credit Loans

In a perfect world, we’d all have perfect credit. In the real world, however, financial setbacks can and do occur, oftentimes resulting in less-than-ideal credit. If you need a loan but are struggling with bad credit, you may have more options than you think — particularly with access to the right information.

Usually, people consult banks when it comes to loans and they often get rejected, but as we have said, there are other, just as legal ways to get the money you need.

Read on to know more about navigating the world of bad credit loans and coming out ahead.

What is Bad Credit?

Source:strydecanada.com

What, exactly, constitutes “bad” credit? It varies, depending on who you ask. For example, while personal finance website Nerdwallet declares a bad credit score to be one below 630, credit and identity protection service Privacy Guard puts the number anywhere between 300 and 499. The takeaway? Bad credit may not be as clear-cut as you think, although many lenders will view you as a credit risk if your score is below 620.

FICO, a company that specializes in “predictive analytics” has become the global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries.

Your FICO score is comprised as follows:

  • Payment history (35% of the FICO score)
  • Debt/amounts owed (30%)
  • Age of credit history (15%)
  • New credit/inquiries (10%)
  • Mix of accounts/types of credit (10%)

As you can see, your payment history and the debt owed make up 65% of your credit score. So, if you have old debts you haven’t paid or if you have “maxed out” on your credit cards, both of those things will have a negative impact on your credit.

The age of your credit history translates into how long your credit accounts have been open. Longer credit history makes it easier for FICO to predict your long-term behavior so long-standing accounts paid on time will most likely have a positive impact on your score.

The 10% new credit/inquiries that make up new credit and credit inquiries pertain to the number of new credit accounts you open and the number of credit inquiries i.e. the time your credit has been checked, most commonly while applying for a credit card or loan. Having fewer credit cards and using around 30% or less of the credit available to you is recommended by companies such as Creditry.

The final 10% credit mix category is somewhat vague but experts agree that a mix of various kinds of credit (credit cards, personal loans, credit lines, auto loans) can make a borrower appear more favorable and capable of handling various kinds of credit and “generally represent less risk for lenders.”

Getting a Bad Credit Loan

The first step in overcoming credit woes is the same: Don’t panic. Bad credit happens and — with the right strategies in place — it doesn’t have to be a major roadblock. The truth is that it IS possible to get a personal loan even with bad credit. While some banks or credit unions may not approve you with a low score, many lenders offer loan options for bad credit.

There is a catch, however: You can expect less than favorable terms with bad credit loans than if you had a stellar credit history. For starters, you will likely borrow at higher rates, which means you will end up paying more over the life of the loan. Loans for bad credit may also require a cosigner. Some lenders will also work with you to consolidate your debt into a single loan, although qualifying for this arrangement may rely on having an acceptable debt-to-income ratio.

Therefore, you need to consider every aspect before you make your final decision. Is getting a loan worth it with such a high-interest rate? Sometimes, we have no choice, but to accept it.

One last thing to keep in mind when searching for loans for bad credit is that they can differ significantly from lender to lender, so it’s critical to shop around. Visit various landers, both online and offline and see where you can find the best deals. It will take longer to find it, but you can at least know that you did what you could with a low credit score.

Source:carloansquickapproval

Additionally, be wary of bad credit loans that seem too good to be true. Reading the fine print can help you avoid hidden fees, penalties and rate changes. In case you know your credit score is at the bottom and you run into a fantastic deal, think twice. Nobody – banks nor lenders – is willing to give you all that money with a low-interest rate and other perks if you have a bad credit score. The only difference is that the banks will reject you while the lender are going to offer you some room to breathe.

The good news? While bad credit is a hindrance, it doesn’t have to be a permanent one. Once you do get a loan, you can immediately begin boosting your credit score by making full, timely payments.

But the opportunities for improving your financial picture don’t end there. While most negative items on a credit report fall off after seven years, why wait? The FTC’s five proactive steps toward improving your credit score offer a simple pathway to better credit and a better future, free of having to deal with bad credit loans.

Conclusion

Source:cnbc.com

Hopefully, you have realized how bad credit score works and what your options are. The good news is that once you get that loan, you can start improving your credit score and eventually, patch things up. It does take some time to recover, but there are always companies that will take you in.

Be careful what you agree to and always do thorough research because that will save you from paying fees you didn’t mean to pay.

What is an Installment Loan?

The ever-increasing cost of national expenditure has made people breathe heavily to manage the standard of living and making ends meet. The only solution left out for survival is to seek external financial assistance in terms of installment loans, which you can explore more at Planet-Loans.com.

What is an Installment Loan?

Source:fintrakk.com

Any type of credit, which is paid back over a certain period of time on a fixed schedule is known as “Installment Loan”. The function is to divide the cost of a large purchase over a time period so you can have the item upfront. It helps for bad credit users to consolidate their debs to bring harmony between your existing financial state and your devouring demands.

There are many advantages to taking it. They have predictable monthly payments, so you can budget money well. They also have early repayment options. Plus, they have a low-interest rate and the opportunity to use them as a tax deduction.

For better understanding, we have examined the most common types of installment loans for those looking solely to build credit. Mortgage, personal and auto loans are some of the most common examples.

Key Features

Source:rightfinancial.com.au
  • Fixed Payment

A fixed payment is the amount of money you are required to pay toward the installment loan on a regular basis. For instance, when you have a mortgage you pay off a 30 year fixed loan with a set of monthly payments that gets applied toward the principal, interest, taxes, and insurance. That is why credit cards are not because the monthly payments are not fixed.

  • Lowest-Interest Rate

Source:newscase.com

The interest rate on an installment loan affects both the fixed payment as well as the financing costs over the life of the credit. The lending term is the length it takes to repay. Most commonly the loan on a mortgage is either 15 to 30 years. Auto and personal loans are much shorter in terms of the repayment period.

  • Collateral Damage

One of the key features of an installment loan is whether or not it is secured or unsecured. A secured installment loan like a mortgage, auto, or boat, requires that you put up collateral to get financing or a more reasonable interest rate. If you fail to pay the creditor can repossess the property you put up as collateral.

Unsecured credit does not carry the risk of losing the property because they do not require you to put anything up as collateral. If you default, you can risk a negative impact on your credit score. Personal loans are often unsecured. To get a good interest rate on an unsecured loan, you typically need to have good credit. When you have a good history of paying off debts, it can play a big role in whether or not you are approved for an advance.

Factors to Consider Before Applying

Before applying for installment loans for bad credit, you should have considering the following factors before applying for an installment loan, as these tips might be useful:

  • Search Wisely For Lenders – You first need to consider a number of lenders. The number of installment lenders in the market has greatly increased and finding one to offer you the loan should not pose a very big challenge.

However, it is not advisable to rush into a deal with the first lender you come across without actually comparing what other lenders have to offer. This is a move that should help you find lenders who charge affordable interest rates for the advance.

Source:paydaysoloonline.com
  • Review Your Credit Rating – You should also review your credit ratings prior to submitting a credit application. Most credit reports are less impressive simply because of errors in them. So prior to submitting your application, you should grab your report and look for any errors that it may contain. If you notice any, it is important to have it corrected as this may lower your interest rates.
  • Don’t Over Borrow – You should avoid over-borrowing. The more you borrow, the higher your interest rate is likely to be. So to avoid paying more, you should only borrow what you actually need. This type of financing would also not be suitable for things like funding vocational trips.
  • Payback Duration – The duration you are given to repay the loan is also very important. With installment loans, you can have up to a maximum of five years to repay. However, the faster you repay it, the better. As such, it is advisable to repay your credit within a year if you can manage to raise large monthly installments that accompanies it.
  • Deal with Legit Companies – When looking for this type of loan, you must also ensure that you only deal with legit companies. Make sure you verify the lender’s details from the government authorities. This is very important, especially when borrowing from online lenders. You can also search on the internet for any reviews or complaints made against the said lender. This will help you know how the company carries out its business and how it deals with clients.
  • Terms & Condition – Other terms and conditions of the service are also very important. For instance, you must consider if there will be any penalties should you decide to clear the loan in one installment. You must also understand if there are fines for defaulting and try to avoid them. All these will go a long way in determining how much you repay and must therefore be taken very seriously.

Conclusion

A poor rating should not stop you from reaping the benefits of installment loans and any other type for that matter. The most important thing is to ensure that you understand everything you need to know about the credit before making a decision. In fact, bad credit can actually help you improve your rating if you make all the repayments in time.