Guide to Bad Credit Loans

Sometimes, you’re faced with a bill or expense that’s out of your budget, and you need more cash to pay for it. To make matters worse, your credit score might be low, so you know you’re unlikely to qualify for a personal loan from a traditional lender.

The frustrating thing is that not everyone with a low credit score is irresponsible with money and has a massive amount of outstanding debt. The good news is that not all loan options are closed to you, and you can apply for a bad credit loan explicitly for folks with bad credit.

Understanding Your Credit Score

Most people start with a low credit rating. You must borrow and pay it back on time to improve your credit score. This shows lenders how you handle your debt.

Five factors, namely determine your credit score:

• Payment history
• Your debt (the amount of money you owe to lenders)
• Amount of available credit compared with the amount you’ve used
• Credit mix (various loans you’ve taken like mortgage, car, and student loans)
• New credit you’ve recently secured or applied for

Since your payment history accounts for the highest percentage of your credit score, it would be helpful to take a loan and pay it off within its terms, as this contributes towards your payment history and will improve your credit score. Achieving a credit score of  670 or above is considered good, allowing you to secure a loan with reasonable terms.

You may be in a catch-22 situation because you need a good credit score to secure a loan, but to improve your credit score, you need to borrow money. That’s where bad credit loans come in – you can secure a bad credit loan and use it to cover your expenses and improve your credit rating.

Types of Bad Credit Loans

If you need a quick loan, you may want to consider applying for a bad credit loan. There are several types of bad credit loans, and you can apply for them at the lender’s premises or online with lenders like CreditNinja.

Some common Bad Credit Loans Include:

Payday Loan

A Payday loan is fairly easy to secure, and you can typically get the cash quickly, making it a favourable option in an emergency. However, your income usually determines the loan amount since you must pay back the debt with your next paycheck or within two to four weeks.

You must be over eighteen and provide a valid identity document to qualify. You may also have to provide your bank account details, phone number, proof of address, and proof of income.

The application process is usually fast, and you may be able to receive the cash on the same day.

The drawback is that these loan types usually have high-interest rates and a very short payment period. In addition, if you can’t pay back the loan, you may be able to roll it over, which means you will incur more interest.

Credit Card

If you’d prefer not to apply for a loan but have a credit card, you can use your credit card to get cash. There are two ways to do this. The first option would require you to make use of internet banking. Link your credit card to your check account on your bank app and then withdraw the funds using your debit card or pay your bills online by wire transfer.

Another option is to withdraw cash using your credit card. You would need to set up a pin code on your credit card, which you can do online or with the credit card company, and then you will be able to withdraw the money from an ATM.

Remember, though, that the amount of cash you have available to withdraw or transfer is usually lower than your swiping amount. It’s also best to repay the amount you used within your billing cycle, as the interest on credit cards is notoriously high.

Things to Consider Before Taking a Bad Credit Loan

While Bad Credit loans can be useful when you need a quick loan and may help boost your credit rating, you must think carefully before signing for one.

Bad Credit loans usually have high-interest rates, fees, and short payment terms, making them expensive and difficult to repay.

In an emergency, when you are searching for a quick loan, it’s imperative that you get a few quotes and compare the terms rather than taking the first one that’s offered to you.

Conclusion

Bad Credit loans can be a helping hand to folks with a low credit score who need a loan. These loans are usually easier to secure, and you can get the funds quickly, but they may have high-interest rates and less favourable terms. So always do your homework before taking a loan, and be certain you can repay it.