It can happen to anyone – you have bad credit, due to problems or financial mishandling in the past and now you need to borrow some money urgently. You probably think that no one will lend it to you, but think again; that’s what bad credit personal loans are for. This is an unsecured personal loan of maximum $5000 that will be granted to you based on your present ability to pay and not based on your credit history.

The basics about bad credit personal loans

There are some things you need to know about bad credit personal loans. First, the maximum amount is $5000, as I mentioned. Second, the repayment time is usually shorter (less than 12 months), which results in higher monthly payments.

It’s good to know what the additional fees are and that there are options for flexible repayment. Depending on the provider, you can repay in as little as 16 days or in as long as two years.

Generally, you want bad credit personal loans to be your last resort when you have no other options. Obviously, they can be a life-saver, when no one else will extend a hand to help you, but they can also drive you further down in debt.

Before you take out such a loan, you have to review and weigh your available options very carefully and decide whether or not you will be able to repay it.

How do bad credit personal loans compare to high-interest credit cards?

In this regard, bad credit personal loans can be quite similar to high-interest credit cards. The interest will, of course, be higher, because of the short repayment schedule and the relatively high risk you supposedly represent, due to your bad credit.

The interest on late repayment will also be higher with both options, so that’s something you may want to keep in mind. Especially seeing as credit card debt in Australia is around $50 billion (yes, you read that correctly), providers make bank on interest – as much as $600 a year per person.

Of course, there is also the fact that you take the loan once and then repay for the period of time specified; unless you renegotiate an extension. A high-interest credit card, on the other hand, is the gift (or curse, depending on your view) that keeps on giving. So while you have the money to spend over and over again, you also have the potential debt to accumulate.

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