BAD CREDIT LOANS
Loans made to borrowers with poor credit. The interest rate is generally higher than for borrowers with good credit. When you have bad credit, almost all banks or credit unions will not allow you to get a loan. The bad credit loan, however, can help people who are currently in a situation of bankruptcy, foreclosure, or other credit-challenged circumstances.
Things to Look Out For in Bad Credit Loans
If you’re considering taking out a bad credit loan, look out for some of the following pitfalls.
- Late Payment Increases – Rather than foreclosing on your loan when you are habitually late or missing payments, some lenders now increase your interest rate as a late payment penalty. Of course, you should be making your payments on time anyway, but look out for these late payment increases as they can cost you a lot of money.
- Prepayment Penalties – Many bad credit loans want to make sure you keep the loan for a minimum period of time. They will institute a prepayment penalty, or fine, if you pay the loan off sooner than they want you to. In some cases, these prepayment penalties are only for a matter of months or 1 or 2 years. Be wary of these penalties and make sure you know when yours is up if you must have one to secure your bad credit loan.
- Balloon Payments – A balloon payment is when you have low payments up front, only to have a huge payment at the end of your loan term. If you are prepared for this, this kind of program can work very effectively, but if you are ill prepared you can get yourself into serious trouble, so be aware and plan accordingly.
How Does it work?
Many consumers with less than perfect credit scores often think that is impossible for them to find lenders eager to provide them the credit accounts they need. After all, they know for a fact that credit companies usually shy away from extending financial assistance to people with poor credit
However, with the gradual economic improvement, more and more banks and credit agencies are now willing to provide credit accounts even to consumers with low credit scores. So, if you are diligent enough, for sure you will find banks and lenders that can provide you the bad credit personal loans you need.
Still, many people do not know how such credit programs work. And not everyone is knowledgeable of the features and common characteristics which these poor credit loans possess. So, we have provided a short discussion regarding these credit programs below.
- Bad Credit Personal Loans Demystified. A bad credit personal loan is a type of credit account extended to people with poor credit ratings. Through this poor credit loan, people are given sufficient funds that they can use not only in financing an immediate need or emergency, but also in rebuilding their credit reputation. Compared to loans extended to consumers with excellent credit ratings, bad credit personal loans usually carry relatively higher rates of interest and fees. Not only that. Most poor credit loans are secured; meaning you have to pledge a property or an asset against your loan to guarantee the immediate repayment of your credit account.
- But how does a bad credit personal loan work? First, you provide a loan counselor a clear picture of your finances. You would need to discuss with the loan counselor how much money you earn each month as well as your personal properties that you can provide as collateral for your poor credit loan. After the loan counselor evaluates your credit application and decides in your favor, soon you will be asked to understand the payment clauses and stipulations of your bad credit personal loan agreement. After you have understood and signed the credit agreement, you will be given the proceeds of your bad credit personal loan.
- But your obligation with the creditor does not end there. Of course you need to adhere to the payment schedule stipulated on your credit agreement. You have to make sure that you pay your credit charges completely and prudently as this will not only help retire your credit obligations but also repair your credit history.
With bad credit personal loans, people with poor credit history will find it possible to receive sufficient funds that they can use in financing their needs. Not only that. By responsibly managing these credit accounts, they can also effectively pave the way towards reestablishing their credit profiles and recovering their financial health.