When you have bad credit, you could have problems when accessing financing. Nonetheless, if you’re in this position, you still have a range of options to choose from; we’re referring to bad credit loans. While you may choose from unsecured and secured loans, you may benefit from lower interest rates and convenient terms if you are willing to offer security. Lenders might be open to negotiation considering that the risk is significantly diminished with the inclusion of security. So, we assembled the main points you should know on the topic of bad credit loans and the types of secured bad credit loans you can get. Let’s proceed!
Types of Secured Bad Credit Loans
To start with, the type of loan you can get will depend on the collateral you facilitate. Generally speaking, though, you’ll have to choose between the following options:
- Car Loans: If you intend to replace your current car with a new or used vehicle, you can provide the car as security for the loan. Doing so will help you to obtain a more favourable interest rate. Nonetheless, you should carry in mind that these loans feature a range of restrictions regarding the type of car you may purchase.
- Secured Personal Loans: A secured personal loan allows you to buy a valuable asset, such as a car, and place it as security. However, you still have the alternative of using an existing asset as collateral; just to name a few: a motorbike, caravan, boat, etc. Some lenders might even accept jewellery or other valuable assets, as well.
- Home Equity Loans. If you already have equity in your home, you might get a secured personal loan that would use your equity as collateral.
How to Compare Your Options?
It’s worth noting that bad credit loans have different characteristics, loan terms, fees, so on and so forth. Therefore, you should do your homework and compare your options before signing a deal. Here are the main factors you should consider:
- Loan Term: Depending on the loan you select, the loan term will vary. Although in general, a personal loan ought to be repaid in 12 months or so, the timeframe for a car loan might be up to seven years. Additionally, in the case of a home equity loan, you can benefit from a longer repayment timeframe.
- Loan Amount: The maximum and minimum sums of money will differ with every loan type and loan provider. Evidently, the type of security you can provide will play a role in this respect.
- Interest Rate: Typically, you may choose between variable and fixed interest rates. Nonetheless, since we’re referring to bad credit loans, you should anticipate the interest rate to be higher than in the case of conventional loans.
- Repayment Flexibility: Depending on the type of loan you take out, the flexibility will differ. You should inquire whether you are expected to make repayments weekly, fortnightly or monthly. You should also check to see if the loan terms specify any early or extra repayment penalties. This is important, especially if you plan on repaying the loan as soon as possible.
- Purpose of the Loan: If you’re not applying for a car loan, you can utilise the sum of money for numerous legitimate purposes.
- Building Credit: Getting a bad credit loan gives you the possibility of repairing your credit history. Still, in order for that to really happen, you should make timely repayments. Otherwise, you’ll be right back where you started.
What Else Should I Consider before Applying for Bad Credit Loans?
If you’ve made your choice and you intend to apply for a bad credit loan, there are some things you should put on your checklist.
- Always analyse your budget and borrowing possibilities before sending in an application for bad credit loans. If you’ll only worsen your financial situation by taking out a loan, perhaps you should rethink your decision.
- Although short-term loans might require you to make higher repayments, the amount of money you pay in interest rates is significantly lower. Simply put, shorter loan terms equal saving on interest.
- Unless you have gone through the PDS, you shouldn’t comply with extras such as loan insurance.
- If you’re considering taking out a car loan, you should assess your car’s depreciation in time, and establish whether the investment is worth it or not.
- Before agreeing to any loan terms, you should gauge how much you’ll be paying in interest rates and additional charges, and determine whether you can afford that, or not.
Final Thoughts
While bad credit loans can appear like life-saving solutions to financial difficulty, they could also make things more overwhelming. That’s why you should be 100 percent certain that taking out such a loan is the right decision for you. If the situation isn’t pressing, you might even wait around until your credit enhances, and you may get better loan terms.
If you want to get the assistance of a reliable lender, get in touch with our friendly team at Bad Credit Loans today. We have numerous financing offers and the experience to help you!
