Bad Credit Loans: Answers to the Frequently Asked Questions

Bad Credit Loans

If you suddenly need money but you do not have a high credit score to get a loan from big banks, you should not give up. There is help available if you only open your mind and you do a little research.

You can consider loans in arkansas for bad credit. If it is your first time encountering such, here are the frequently asked questions:

Why bad credit loans might work for you?

Ultimately, bad credit loans allow you to rebuild your credit score. You know that a poor credit score can limit your borrowing options, right? If you commit to on-time payments, this loan can help you improve credit score.

Other benefits of bad credit loan include quick access to loan money and repayment is for a longer period of time. When it comes to quick access, the lender will usually process your loan within a few days of your application – sometimes immediately. As for the repayment, you can choose how long you want to pay.

What are the types of loans for bad credit?

Keep in mind that there are a number of loans available to those with bad credit – secured loans, guarantor loans, and peer-to-peer loans. Secured loans allow you to borrow against an asset that you own like your house or car. This serves as a security that the lender will get their money back.

Guarantor loans, on the other hand, require another person with higher credit score to commit to your loan repayments – in the event that you miss them. Finally, peer-to-peer loans let you borrow from individuals.

Are there alternatives to a bad credit loan?

There are other alternatives to bad credit loan. If you want to borrow a smaller amount for short-term, you can consider overdraft on your current account. You can also consider borrowing on a credit card, which tends to have higher interest rates.

Is there a difference between payday loans and bad credit loans?

Do not get confused or interchange the two loans because they are completely different. The differences are in repayment time and the interest rate. A bad credit loan is considered an installment loan. This means that you have to make a consistent payment every month according to the agreement but it is usually 12-36 months.

Payday loans are not an installment loan. It is tied to your next paycheck. This means you are expected to pay it within the next two to three weeks. As for the interest rate, bad credit loans can range from 6% to 36%. The interest rate on payday loans is more like 399% on every $100 borrowed.

How to compare bad credit loans?

It is crucial that you learn how to compare because it can help you find the right loan that will work best for your situation. If you consider online, there are many tools you can utilise to help you identify the right lender. When you compare, you should remember three factors – average income, loan terms, and the interest rate.

What you can use this loan for?

If you are approved, you should ensure that use the money wisely and responsibly. Just like a personal loan, it can help you pay larger expenses up front like a wedding, car, home improvements, and holiday. You can also use this to consolidate credit card debts and other debts.