One of the main consequences of having a low credit rating is that you may find it difficult to borrow any kind of money, and bad credit loans are practically one of the only solutions most people struggling with low credit scores might have at their disposal.
But is it worth getting a bad credit loan and should you pursue that course of action as a long term endeavor? In the following, you will find all the answers you need to this question and many others that you might be interested in.
Is It a Good Idea to Look for Bad Credit Loans?
First of all, let’s take a look at exactly what a bad credit loan may be. It is essentially a type of loan designed for people with bad credit history, who were unable to properly pay off other loans, as well as credit cards or mortgages. In many cases, banks and other lending institutions will no longer lend to these individuals, however, there are certain lending organizations that do offer advantageous loan offers that may or may not be suitable for any particular borrower.
For instance, you may want to get a small amount of about $2,000 to cover some bills or your rent until your next paycheck. Depending on your credit, your current financial situation, your job, and a variety of other factors, banks might be unwilling to lend you that amount.
Bad credit loans, however, will be available, usually on a short term repayment basis, and with certain trade-offs – for instance, a much higher interest rate than you’re used to, or the necessity of collateral to guarantee that you can repay your debt.
These loans are normally a very good idea when you have an emergency, you need to pay off a few bills at a short notice, or you want to make a short term investment that you know will pay off in time. Great care has to be taken, of course, as not only can these loans do some significant damage to your credit rating, if you don’t pay them back, but some of them might even be scams.
Avoiding Bad Credit Loan Scams
It is no secret that scam artists are everywhere these days, and you often don’t know who to trust. One of the most exploited markets involve bad credit loans that are often promised by shady lenders in exchange for a “small” fee, but the agreement is never honored in the end.
Some shady “lenders” even set up legitimate looking websites, where they promise ridiculously low interest rates, as well as other benefits geared toward attracting unsuspecting victims. The idea behind these scams is for the lender to usually to ask for a fee that can be between $50 and several thousand, depending on the loan amount, and then skipping town with a significant profit, and without actually lending any money.
Whenever a lending company asks for any type of fee for bad credit loans, that should already raise some red flags as to the nature of their agenda. Not only are these “advance fee” loans illegal in most parts, but it doesn’t even make much financial sense to ask for money before being willing to lend it.
Legitimate Bad Credit and Consolidation Loans
Despite any scams that may be out there, you’ll find there are also many respectable institutions that have excellent offers for people with bad credit. These normally involve payday loans, bad credit personal loans and consolidation loans.
Non-bank lending and microfinance options are some of the best solutions to take into account when you want legitimate bad credit loans. Also, if you are a business owner with bad personal credit, you might consider lending money from friends or loyal customers who recognize the potential of your company and of the expanding strategies you have in mind.
A home equity line of credit or a secured consolidation loan with an advantageous interest rate may also be a good enough solution to get you the amount you need. While these options may put your home or other possessions in jeopardy, payments are normally quite predictable, so you can set up a viable long term strategy to ensure you can make all your payments on time.
Bad credit loans are available in many different shapes and sizes, and comparing offers, interest rates and the background of the legitimate lenders that are behind these deals are the surest way to make sure you get the best available borrowing options.