Common Questions

Emergencies happen, and sometimes, you’re simply strapped for cash—the leaking roof, an important car repair you just can’t put off anymore or a family health emergency. And while the concept of an emergency fund is a given, in reality, just how many of us actually have one?

A poor credit score is an added hassle as this means you can’t go the usual route of a regular, client-friendly loan at the bank. Fortunately, there are loans for people with bad credit, also known as short-term loans, payday loans, or online loans, you can rely on to get through a financial crisis.

You’ve probably heard of these, and if you haven’t, here are five of your most frequently asked questions about these loans for people with bad credit and our answers.

Should I get one? One of the first questions people ask is, “Is this loan right for me?”, “Am I eligible” or “For whom are these types of loans?” Loans for people with bad credit are essentially that: loans for people with a poor credit rating and are therefore not eligible for a regular loan.

So, should you get one? Only if you really need the money, and if you’ve already explored other options (e.g., borrowing from friends). Loans for people with bad credit, while easy and convenient to secure, can be a liability especially if you have problems meeting your financial commitments.

What are the ups and downs of these loans for people with bad credit? Convenience and ease are the two selling points of these short-terms loans as they don’t require a lot of documentation when you apply. Lending institutions that offer these loans abound so you have a wide range of options and can shop for the best terms. On the other hand, they can be a tricky business with their high interest rates, penalty fees and in some cases, even hidden charges.

The golden rule to weeding out predatory lenders from your list is to do your research, check whether there are complaints lodged against your preferred lender at the Better Business Bureau, and read the fine print /loan terms before signing anything.

What do I need to apply? The standard requirements when applying for loans for people with bad credit include a completed application form, a billing address, an active bank account (where the money will be deposited into), and proof of income or a certificate of employment.

The requirements may vary per lender and type of bad credit loan you are getting. If you are getting payday loans, a proof of income such as your payslips are required. For car title loans, a car title is required instead of a proof of income.

One thing that most people don’t know though is that lending companies still perform some level of credit check. Unlike regular loans, however, this credit check very seldom affects the outcome of the loan application.

What are the terms of most loans for people with bad credit? This depends on the type of bad credit loan you are getting. With short-term loans, your loanable amount is smaller than that offered by a regular loan, usually ranging from $100 – $1000. Loans like payday loans must be paid within two weeks to one month while car title loans may have longer and more flexible repayment term. An important consideration is the interest rate, which is about 20 – 25%, twice or even thrice the rate of regular loans.

Are all loans for people with bad credit legitimate? Scams abound when it comes to these kinds of loans, so a good research into the legitimacy of the lending institution is important. For example, despite its less-than-friendly terms, these loans do not require a cash-out or a deposit upon application, so if you encounter a lender asking for one, steer clear.