If you want to apply for a loan with a bad credit history, you’ll have limited options. In such a case, the options are more expensive than when you have a good credit score. But it doesn’t mean that you won’t find the right bad credit loan that suits your needs. Yes, there are some excellent no credit and bad credit loans that you can obtain for short-term financing. You only need to do some research and understand the advantages and disadvantages of a bad credit loan. Be knowledgeable and wise when borrowing some quick cash while having a bad credit score. Consider these options when looking for the bad credit loan that’s right for you–
Short-Term Installment Loans
Bad credit installment loans often come with repayment terms from 9 to 18 months. When you apply for an installment loan, you have to pay off the money you owed not in one lump sum, but in a series of scheduled payments. Moreover, the lender charges an “ongoing interest rate” instead of a flat fee. There are some similarities between installment loans and regular personal loans. The difference is that an installment loan comes with a higher interest rate. The most common examples of installment loans are student loans, auto loans, and mortgages.
Every payment of an installment loan also goes towards both the principal loan and interest amount. Early payments cover the interest amount, and later payments go into the principal amount. That’s the amortizing nature of installment loans. The ratio between the interest and the principal amount varies depending on the amortization schedule of the loan. Installment loan rates differ according to the state you’re living in, the lender, and the loan product. The rates are also lower than payday and title loans. But if you pick a long-term installment loan, you have to pay more money.
However, you can save money if you pay off early as the interest of an installment loan is charged as an ongoing rate. So, make sure to keep the cost steady by paying according to the scheduled payment dates. You should ask the lender if they charge extra fees or prepayment penalties. In this way, you’ll know if the loan product is good for you or not. Be aware that it’s also a common practice among installment loan lenders to verify your income and run a soft check on your credit history to determine your ability to pay back the money you’re borrowing.
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Title Loans
Title loans have similarities to payday loans in a lot of ways. But there are also striking differences between the two loan products. For instance, a title loan is a secured loan, which means that you have to put the title of your car as collateral. One of the qualifications for a title loan is that you must own the vehicle free of any liabilities. Since there’s collateral, it means that you can borrow a significant amount of money through a title loan. However, keep in mind that the amount of the loan hardly ever equals the full resale value of the car. Also, the interest rates for this type of loan is high despite the collateral that reduces the risk on the part of the lender. Lenders of title loans typically charge 25 percent of the amount owed every month.
If you calculate the annual percentage rate, it goes up to 300 percent annually. Of course, failure to pay the total amount of the loan, the lender can repossess your car and sell it to recover their losses. In 2016, the Consumer Financial Protection Bureau found that one in five auto title loans resulted in the cars of borrowers being seized due to failure to repay their debt.
Payday Loans
This is a common type of loan that doesn’t check your credit history. Payments of payday loans are deducted on your every paycheck until the amount of money borrowed is paid off. As such, this type of loan is also called ‘cash advances.’ Keep in mind, though, that payday loans are short-term small loans. So, if you want to borrow a large amount of money, this type of loan is not for you. Payday loans have a typical repayment term for only two weeks, and you must pay the loan off in one lump sum payment.
Moreover, this type of loan charges a flat interest rate. Typically, for every $100 borrowed, there’s a $15 in interest. Unlike installment loan
products, you won’t save money even if you pay early the total amount of a payday loan. However, compared to traditional personal loans, payday loans are much more affordable because the calculation of the interest is on a weekly basis. Still, most people have difficulty paying the amount borrowed on time due to the short repayment terms, high-interest rates, and lump sum repayment structure.
If you want to get a payday loan, you just have to sign an automatic debit agreement or make a post-dated check for the money you’ll borrow first. This is to ensure that you repay the amount when your paycheck arrives. You can apply for payday loans online or obtain it from stores that offer such loan products near you.
Pawn Shop Loans
If you badly need to obtain some quick cash, then go to a pawn shop. You just have to bring a valuable item that can be used as collateral, and you’ll have your money. Of course, the amount you can loan from a pawn shop will depend on the value of your item. You’ll be able to borrow a significant amount of money if your item is high in value. Repayment terms and interest rates vary from state to state and from one pawnshop to another. Some pawnshops have high-interest rates, while others have low-interest rates. It’s wise to check the local laws and do some research about the interest rates of pawn shops near you to pick a loan that suits your needs.
Takeaway
Don’t worry too much about your bad credit score because some loan options are not so strict when it comes to your credit history. You must check out installment loans, title loans, payday loans, and pawnshop loans if you need some quick cash right now.
