Life happens. Whether your car breaks down at a bad time or you need to cover some unexpected medical costs, there may be a time when you need to find a loan to cover an emergency. That’s where bad-credit loans can come in.
If you have bad credit, you don’t need to automatically rule out the possibility of a loan to cover your expenses. It can be more difficult to get one, but it isn’t impossible.
When you need a bad-credit loan to fund your financial emergency, there are many choices. Let’s take a closer look at the available options.
Bad Credit: What It Means For Loan Approval
Your credit score is based on your credit history. So if you have a history of irresponsibly managing your credit, then you’ll find that you have a bad credit score.
The range for FICO ® credit scores is 300 – 850. Generally, anything under 670 is considered a poor credit score. If you have a credit score higher than 670, then you’ll fall into the good credit category.
A good credit score shows potential lenders that you’re trustworthy. You have a history of responsibly repaying your loans, which can lead to better loan offers. After all, the lender wants to ensure that you’re able and willing to make the payments on your loan.
On the flip side, a poor credit score tells the lender that you’re less creditworthy. Bad-credit loans are available to people who have poor credit scores. With a bad credit score, you can expect to have a more difficult time securing a loan. If you can find a lender that is willing to work with you, then you’ll likely face less-than-ideal loan terms. Generally, you can expect higher interest rates and lower loan amounts if you have a bad credit score.
Although you’ll face more difficult terms in the world of poor credit loans, there are some loans worth taking on. Unfortunately, you might have trouble finding these reputable loans in the midst of some downright dangerous options.
Loan Options For Bad Credit
It’s completely possible to secure a loan with bad credit. Before you start looking for a lender, there are a few things you should be aware of. Many bad-credit loans are offered by lenders that don’t have a great reputation. So it’s important to know what you should be looking for in a fair loan offer.
Dangerous Loan Options
Many of these lenders offer loans to people with poor credit without considering the long-term success of these borrowers. Often, these borrowers are ill-equipped to handle the monthly payments of the loan due to high interest rates and unfavorable terms. This can lead to the borrowers falling into more debt in order to keep their heads above water.
- Payday Loan: A payday loan is a short-term loan with an extremely high interest rate. In most cases, the loan amount is $500 or less. As the name suggests, you’ll need to repay the loan with interest on your next payday. It can be very risky to take on a payday loan. If you’re unable to make the payment, then you’ll be forced into more debt.
- Loans on Property: Lenders will provide you with a short-term loan that’s secured by your property. You can use your car for a title loan or any valuables around your house for a pawnshop loan. These loans will have an extremely high interest rates attached. If you’re unable to repay the loan, with interest, then you risk losing your property forever,