Even a solid budget may fail due to unavoidable circumstances. An employment setback, relationship breakup, emergency medical or dental expenses, accidents, vehicle repairs, and innumerable other unexpected expenses can blow up our budget and leave us needing more money in a hurry.
When these types of emergencies occur, we may have no option but to borrow money to cover the unplanned costs and get us through the tight financial spot.
Can You Borrow From A Regular Lender?
If you have a short credit history or a poor credit record due to a few financial missteps like late or missed payments, bankruptcy, severe delinquency, or maxed out credit cards, your application for a loan from a regular lender like a bank, is likely to be rejected.
This will limit your borrowing options and you may need to apply for a bad credit loan.
What Is A Bad Credit Lender?
You may still have options from a variety of lenders who will lend to people regular lenders have turned down.
Still, these options are more limited and are likely to be on less favorable terms.
These lenders are called bad credit lenders and include various banks, credit unions, and online lenders.
They vary in the strictness of their requirements and in terms of their loans.
Because bad credit lenders consider lending to people with poor credit scores riskier, they generally charge higher interest rates and fees.
What Is Bad Credit?
Bad credit generally refers to a person’s credit score being less than 580.
This score is often referred to as your FICA score and is calculated using information from your credit reports, which summarize your borrowing history.
They help lenders decide whether or not to approve loan applications and influence the loan terms.
Note: Most regular lenders will not consider lending to people with credit scores below 580.
Sometimes, even slightly higher scores will not lead to a successful application. Even an application to a bad credit lender is not guaranteed to be successful.
What Are Bad Credit Loans?
Bad credit loans are loans made to people who do not qualify for loans from regular lenders due to their low credit scores.
Fortunately, the recent financial revolution has made it possible to apply for various types of personal loans for bad credit.
A big advantage of these is that they bear a lower interest rate than credit cards, making them a financially better option.
There are various types of bad credit loans online. They vary in their terms, interest rates, fees, and whether they are secured or not.
If they are secured, you will need to put up collateral such as an asset you own like a house or car that the lender may claim if you default on the loan.
However, most bad credit loans are unsecured, so if you don’t own an asset, this needn’t put you off applying for the loan.
A benefit of bad credit loans online is that they allow borrowers to build better credit ratings through manageable payment options over time.
These differ from payday loans, often requiring a lump-sum repayment on the borrower’s next payday, allowing the borrower to spread out their payments.
When a borrower makes their payments on time, the lender will report it to one or several of the credit-reporting agencies, which can increase the borrower’s credit score.
This has a positive effect on the likelihood and terms of any future borrowing.
How Do I Compare Bad Credit Lenders?
It is always wise to compare lenders before settling for one lender, as rates can vary significantly between loans with bad credit.
One may have lower payments, but the lender may have spread it out over more time, resulting in the borrower paying more interest.
Use our comparison calculator tool to find the best bad credit loans for your situation. Some of the best loans with bad credit have the following terms:
- No limits on how the borrower can use the loan.
- Interest rates are lower than payday loans.
- Require no collateral, so you won’t risk losing your property if you default.
- Flexible installments you can comfortably meet over a period of time.
Because of the variable factors involved, you will need to shop around thoroughly when looking for a suitable emergency loan from a bad credit lender.
How To Get a Bad Credit Loan
Check your credit report
This will give you the opportunity to address issues that may be negatively affecting your score and hence may enable you to improve your score.
Check your finances
You need to ensure you have the income to enable you to maintain the new loan repayments.
Check pre-qualification online.
This allows you to check online whether or not you qualify for the loan.
With a pre-qualification from various lenders, you can review and compare them to find the best rates.
Submit an application
Once you’ve found the best lender for your specific needs, submit your application online, along with all the necessary details and documentation, and wait for approval.
Can I Get An Emergency Bad Credit Loan Quickly?
Sometimes you need money as soon as possible to help resolve your financial emergencies, and you don’t have the time to go through the whole brick-and-mortar loan process.
Applying for bad credit loans online can be the perfect solution. The process generally takes from between one day and a week.
Find out more about emergency lending here.