Are You Considering a Bad Credit Loan?

Bad credit loans are personal loans for individuals whose credit scores are too low to receive a loan from a traditional financial institution. Prospective borrowers generally use these loans to cover financial emergencies such as medical bills, job loss, car repairs, and other problems. Bad credit loans can also be used for debt consolidation. 

If you have found yourself in need of some extra funds but have limited credit, a bad credit loan might be the answer for you. You might have questions or concerns about this topic before making the commitment, so we have compiled as much additional information as we can to help you make your decision. 

What is a Bad Credit Score?

Every consumer gets a credit report from the major U.S. credit bureaus and agencies. This report will give a detailed picture of your credit history, including your payment history on any debts or loans you have accrued over the years. Your credit score is a numeric ranking of your credit based on a number of factors from this report, including how long you’ve had credit, the amount you owe, the amount of available credit that you are using, how much new credit you have, the types of credit you have, and whether you pay your bills on time. Lenders often use your credit score to determine how likely you are to repay a loan. Therefore, your score has a tremendous impact on whether you qualify for the loan, how much you can borrow, the repayment period, and the interest rate for the loan. 

Bad or limited credit can impact your loan eligibility. Typically, borrowers with scores of less than 580 are considered to be risky borrowers and tend to have fewer loan options, pay higher interest rates, and can have difficulty being approved for credit cards. 

If you need emergency funding with low credit, a bad credit loan can help. 

How to Get a Bad Credit Loan

Your first step will be to review your credit and check your credit score, then explore lender options. Find reputable lenders who are willing to work with your credit history, then collect application information to make the process go as smoothly as possible. Most lenders will require your annual income, the name of your employer and the length of time you’ve worked there, your Social Security number, your debt-to-income ratio, a summary of your household expenses, and whether you rent or own your home. 

Reach out to the lender to ask any questions about the process. Some lenders can even prequalify borrowers, which would give you an idea of whether you would qualify and the terms available to you. Prequalifying for a loan will not usually impact your credit score. 

After you’ve identified the loan that seems like the best match for your needs, it’s time to apply. Apply for one bad credit loan at a time; applying for many loans at once can lower your credit score, which will decrease your chances of receiving approval and increase your interest rates. 

Different Kinds of Bad Credit Loans

There are multiple ways to secure a bad credit loan, from cash advances to payday loans, bank agreements, and others. Each option comes with different timelines, interest rates, penalties, and other considerations to make. Do your research and work closely with your lender to ensure you’re getting the right kind of loan to meet your needs. 

Things to Consider When Taking Out a Bad Credit Loan

Because bad credit loans are intended for people with poor or limited credit history, they might come with more restrictions than you might find elsewhere, such as long waits for loan approval, higher interest rates, more stringent monthly payment terms, and other fees or penalties. You will want to get a detailed report of what costs to expect from your bad credit loan and carefully assess whether you will be able to handle the associated timetable or the costs. 

You’ll also need to be on the lookout for scams and risky situations when pursuing a bad credit loan. For example, if the lender isn’t concerned with your credit history at all, it should be a red flag. Never take a bad credit loan over the phone or sign up for a loan where you’ll be expected to pay a specific person directly. You’ll also want to check your lender’s credentials and registration in your state before doing business. Ask questions about anything you don’t understand and make sure all fees are thoroughly displayed and explained. Always work with a reputable lender when you take out any sort of loan! 

Trust Your Lender

Working with an established and reputable local lender when pursuing a bad credit loan is a beneficial idea. Doing this ensures that you will pay only what you expect and avoid any risk on your part. It also ensures that all of your questions will be answered honestly, giving you peace of mind throughout the process. Saxe Mortgage Company offers trustworthy bad credit loans to borrowers in San Francisco, San Mateo, Los Angeles, Orange County, Sacramento, and the surrounding areas of California. Contact our office today to learn more!