Sometimes, things do not go according to the plan. You cannot gather the finances for a timely monthly repayment, or you default on your loan altogether because the interest rates are too high. Your credit score plummets, and it makes it impossible for you to get another loan.
Bad credit loans, however, are given by lenders who do not care for your faulty score. But does this make them infallible and the best choice you have? Well, you will decide this yourself after we take a closer look at bad credit loans.
Facts About Bad Credit Loans
- They can be secured or unsecured
A bad credit loan can be secured on one of your assets, like your house or car. If you default or you miss too many repayments, the lender will liquidate the said asset in order to get his money back. Remember that if you have constant problems with making your monthly payments, you might lose your house, car or other belongings.
By contrast, an unsecured loan is a loan that is not fixed on one or more of your assets. Many people prefer the latter option, even though it usually comes with higher interest rates than the secured loan.
You never know what might happen exactly when you are short on money. One solution in situations like these would be to apply for a payday loan, which would give you access to the money in a matter of hours. This is a type of unsecured, short-term loan since you will have to return the money, with an interest of course, after you receive your next pay.
- They can be granted by private lenders
Common loans are given by banks, but bad credit loans are usually provided by private lenders. This, however, has a direct effect on the interest rates, as they can be huge, therefore rendering the loan simply not cost-efficient.
But, on a more positive note, that is not a rule of thumb. Loans with bad credit can be tailored to your needs and financial availability. You just have to do enough research and be patient.
- Peer-to-peer lending is an option
Peer-to-peer or P2P lending is something you should consider if you want a loan but you have bad credit. In this case, you will get a loan from private lenders and investors. Some of them will take your bad credit into account, but you have more chances of getting the loan from them than from banks.
- Bad credit loans do not go hand in hand with debt consolidation
In fact, getting a bad credit loan annuls your need of initiating debt consolidation. Bad credit loans are not a method of debt consolidation, for that matter. That is a consolidation loan, and it’s an entirely different thing. Moreover, it is not recommended to get both a loan with bad credit and a debt consolidation one, because you will have more on your plate than you can eat.
- They are not as easy to get as everyone might think
If you have bad credit, this does not guarantee that your application for a bad credit loan will get approved. Far from it. It is tricky to obtain, and you might have to do more work than those with good credit.
- Bad credit loans can actually help you improve your credit
Through these loans, you get the financial aid you needed and, at the same time, you can improve that bad credit and prove to lenders that you can manage your money in a responsible manner. That, of course, under the condition that you make all of your payments in time.
Myths about bad credit
- They will completely ruin your chances of getting a home loan. That is not true since there are many experienced lenders out there ready to present you some pretty good offers for your home loan. Just do some research and do not hesitate to contact them and put your mind at ease.
- Lenders don’t care about their clients. On the contrary, they actually care very much since the reason of your defaults is closely tied to the events in your life. So, don’t hesitate to tell your lender why you got in this situation and start working on a solution together.
Bad credit loans are valuable tools, but they are often used for all the wrong reasons. If you want to learn more about this type of loan, visit our website www.badcreditloans.net.au and inform yourself properly before you even consider applying for a bad credit loan. We will give you an honest evaluation of your financial situation and might also make you a pretty good offer for a bad credit loan.
A loan with bad credit often comes with many strings attached, and you should be familiar with everything that pertains to it, not just with general info. Make sure you talk to professionals, too, before you get yourself in an unpleasant situation. Credit repair can also be a viable option for you.