To most lenders, the score on your credit report is what defines you. It’s one of the largest determinants of loan approval. And if you have a bad credit history you’re likely to experience difficulty in getting a loan. Even when you get a loan, you may have to pay much higher interest rates, more fees and face greater restrictions with it. This is where bad credit loans come to your rescue. Regardless of your credit score, these loans enable you to borrow at lower interest rates and flexible repayment terms.
What is bad credit & who needs bad credit loans?
Most lenders consider a credit score below 629 as bad credit. When you have a poor credit score you may not have access to normal lines of credit. This is when bad credit loans are most helpful. Moreover, with a bad credit loan you benefit in two ways: i) you get the much-needed funds, and ii) you get an opportunity to build good credit by managing the loan well.
How to pick the best bad credit loans?
Irrespective of whether your credit history is spotless or blemished, the journey towards finding the best loan is always the same. You need to shop around and compare quotes. And when you do so, here are a few attributes to look for:
- Fewer requirements- The best lenders are always aware that the credit score alone is not an indicator of your ability to repay. So unlike traditional banks, some lenders may give you the leeway for approval by considering other positive aspects of your application such as your income, or business profitability.
- Reasonable APRs- Bad credit does not always have to call for higher interest rates. But the best lenders will offer competitive rates of interest and lower the fees as much as possible.
- Flexible repayment terms- Bad credit loans are better paid off sooner. So always avoid a loan with a fixed repayment term for a long period. Instead look for a loan that suits your repayment requirements.
- Higher lending limits- A bad credit score may not fetch you a loan amount as high as a good credit score. But remember that some lenders have higher lending limits even for bad credit.
- Ease and convenience- Some lenders allow you to apply online. Their application and funding process is much faster than traditional banks. Lenders with online accessibility are definitely more convenient because their processes involve shorter wait times.
- Reputation- The lender’s reputation is worth your attention. Learn as much as you can about the lender and read objective reviews. The best lenders are those with proven track records.
Often, those with bad credit are the ones in dire need of a loan. But it is those with a flawless credit history that most lenders are willing to fund. It is this paradox that bad credit loans try to overcome. If handled well, these loans can serve as the light at the end of the tunnel and lead you to a better financial path.