According to a study from the Federal Reserve, 76 million Americans were seen to be struggling financially. Consequently, the study also revealed that almost half of the Americans couldn’t address an emergency expense that requires $400.
Of course, this is an indication that most of the people are not having the financial security they would want to have. To cater to the arising needs, many usually run to take loans to fill in the gap. Some take loans that they can’t pay due to making bad financial decisions. That’s why the study showed that over 30% of Americans have a poor credit score.
You don’t have to spend your days in debts because there are multiple ways you can overcome debts like increasing your income, saving more, rebuilding your credit, and trying to live outside the common paycheck. These actions may take time, but eventually, they will yield for you.
The easiest way to protect your finances is to try as much as possible to avoid all predatory loans which have become very common. However, when a need arises, and you want money ASAP, you will look for options like taking loans. But what happens when you don’t have a high credit score? Fortunately, there are bad credit loans. So what are they?
Bad Credit Loans
These refer to the personal loans for people with bad credit. If you are among the 30% in the USA that has a poor credit score, you can benefit from these loans and service them after a month or less. In our millennial age, lenders for these online loans for bad credit have increased because of the high-interest rates that come along with lending this money.
An In-depth Check on Bad Credit Loans
These personal loans for poor credit come in various types. Some have a high interest which you should try to avoid because there they also have a very short repayment period. Some of these loans with bad credit include:
- Title Loans – This is where you place the title of your vehicle or car before the lender lends you some bucks. Unless you are very sure that you will settle your money on time, it is advisable to avoid such loans. It is part of what is referred to as predatory loans that will squeeze your economy if you fail to pay on time. Unfortunately, one in every five borrowers usually ends up losing their vehicles. Of course, this is why there are too many rollovers which are traps. Again, if you are not sure of your repayment capacity, don’t put yourself in the list of losing your car.
- Payday Loans – This is another risky loan where the lender gives you the money, and in exchange, you write him or her a check which he will cash in at the payday or end of the month. A study has shown that four in every five borrowers of this payday loans bad credit usually end up having their loans renewed or rolled over.
- Installment Loans – These are the most secure types of loans which you can choose to borrow than the predatory loans mentioned above. In this kind of loans for poor credit, you are supposed to pay your loan on some regular installments. They usually come in relatively low percentage in their interest rates.
How Bad Credit Loans Work?
Well, most of the lenders usually impose very high interest depending on the loan you are taking. For payday and title loans, the interest rate can be as high as 400%. You are also required to pay within a very short period, and if you default, the loan keeps on rolling over. You might end up losing your car.
In installment loans, you can decide to make it secure or unsecured. Such loans include mortgage loans. No matter the urgency of the need for money, always check the lender’s terms and be comfortable with them.
What are Some of Bad Credit Loan Options?
Now that you have decided to get some bad credit loan, you have two options you can choose from. Whether to take a secured or an unsecured loan. In an unsecured loan, you will need to sign a contract and enter into an agreement that you will repay your loan on time. In a secured loan, you must have collateral of a valuable thing. If you don’t repay the loan, they sell your property.
Whether you are in bad debts or you have very a poor credit score, you can access a loan that will help you to deal with your emergency. Take your time to know the lender, their terms and conditions, their interest rates, and the repayment period.