4 Things You Need to Know

The phrase “loans for people with bad credit” probably isn’t new to you anymore. Certainly, if you do a quick search online, you’ll find a thousand and one results with the words: “payday loans”, “online loans”, “short-term loans”, etc. You might know of people who have taken out these loans, and you might even have tried applying for one.

But there’s more to these loans for people with bad credit besides being instant, easy solutions for people who need money but cannot get regular loans because of their credit rating. Here are 5 things you might do not know when we talk about these loans.

Bad credit loans can be an easy but tricky answer to instant cash. These loans for people with bad credit come under many names: short-term loans, payday loans, online loans, etc., but one common thing about them is that they’re all temporary and tricky solutions to your cash problem.

They offer the convenience of a loan that you cannot otherwise get from regular banks given your credit score, but in exchange, they come with high interest rates and exorbitant fees. As short-term loans, the repayment period is only typically two weeks to one month, so you need to have ready money to pay your loan by the time the due date rolls in, otherwise you’re going to be stuck with interest charges and late payment fees.

Do a soft credit search before applying for any loan. A soft credit search allows you to “check” into your credit rating and gauge your chances of having your loan application approved. When you know your credit rating status, you’d have a better idea of what type of short-term loan to get where your chance of rejection is slim. Remember, a rejected loan application can only drive your credit score lower.

Check other short-term loan options. A good research also means looking into other possible types of loans for people with bad credit that you can get. Besides those that you can get from credit unions, there are also, for example, bad credit cards that you can apply for. This is a handy solution if you need the money to pay for purchases, not services.

Another popular option is payday loans which are also short-term loans payable on your next paycheck. The amount you can borrow through these loans is dependent on your income or paycheck.

If you can’t get cash advances/payday loans, another option for you would be to use your car title as collateral. Car title loans may offer you a larger amount of money and may offer you more flexible term. This is a great option as well if you have no proof of income or are currently unemployed and have bad credit.

Devise your game plan to improve your credit score. Every loan for people with bad credit can be a stepping stone to help improve your credit score. A good way to start is to make sure that your loan application is approved (therefore, a soft credit search is important). But the most important is to pay your loan on time.

When you take out that loan, make sure that you’ve studied your financial situation to ensure that you have the money to make the payment on or before the due date, and that you won’t be forced to take out another loan just because your cash is short. If you can, pay off other existing loans first before taking out a new bad credit loan, or use this new one to consolidate your other current loans.