Pros and Cons for Personal Loans with Bad Credit
Those needing money and needing it fast often grab at any opportunity bad credit lenders throw at them. These people operate from their need instead of from a logical, informed place. They need to know the pros and cons of bad credit personal installment loans before they type in the first letter on an online application or pick up the phone. What are these personal loan pros and cons?
You’ll want to keep reading before you act…
Personal Loans with Bad Credit – PROS
If you were to take out a car loan but didn’t buy a car, you could be facing fraud charges. The same situation would be much more serious if you borrowed money to buy a house but didn’t. Since you don’t want charges of fraud and misuse of funds, a car or a house should be bought. It’s not the same with taking out a personal loan with bad credit. There are as many reasons under the sun to use a personal loans with bad credit as there are bad credit loan lenders ready to provide you their offer.
Lots of people use cash loans with bad credit to consolidate credit card, student loans, and installment loan debt. The result is one low payment with lower interest rates than the loans themselves. Bankrate tells us that the last month for which there were records was February 2019. The Federal Reserve stated that the median rate on 24 month personal loans with bad credit was ten percent as opposed to the general credit card rate of 15.
No Collateral To Risk
While the house is security for a mortgage loan and the car for an auto loan, the personal loans with bad credit is only secured by the knowledge that you have a good job, even if your credit could use some help. Bad credit short term loan lenders are taking a chance you’ll repay the loan. Time on the job and few debts are good signs you’ll repay the loan. You won’t be risking your car, house, collections, or anything else.
Time To Repay The Loan
If you’re strapped for cash, having a difficult time paying bills, or suddenly need an influx of cash to pay for something unexpected, then repaying any loan could be difficult. With bad credit personal loans, you have between one or two years and five years to repay the loan. One low monthly payment is fixed for this period of time.
Credit Profile Will Improve
Credit bureaus like to see people with varying credit accounts. Repaying loans on time and in full means you’re a good credit risk. Personal loans with bad credit show the credit bureaus that you’re working on improving your credit. Okay, so you won’t be able to borrow as much as if you had had good credit, but each loan you pay off on time will inch your credit score up a bit.
That’s a good thing. As your credit improves, you’ll be able to borrow more and at better interest rates. Keep paying them off on time, and you’ll soon have A-list credit (a score of over 750.)
Establish An Emergency Fund
My parents always told me to put away ten dollars out of each paycheck for an emergency. I’ve always lived paycheck to paycheck like most Americans, so I was never able to save anything. That’s the story of nine out of ten people, unfortunately. However, personal loans with bad credit can help you establish an emergency fund with which to meet anything life can and does throw at you.
In most cases, bad credit short term loan lenders can give give you a loan within hours. Sometimes it takes until the next day after application to receive the funds. This is a giant step above bank loans which can take days up to a couple weeks.
Not As Many Documents
Most loans require your banking records, proof of all your debts, paycheck stubs, the deed to your house, and your first born. Okay, I’m kidding, but with a bank or other personal loans with bad credit lenders, you have to provide a mighty lot of information.. You’ll only need a picture ID, paycheck stubs (at least four, six to eight is better,) and your bank account number. That’s it. Short and sweet, and you’ll have your money within hours.
Lenders offering cash loans bad credit have some stiff competition. They’ll offer you all kinds of perks in order to get your business such as unemployment protection. This would pay off your loan if you lost your job. Some lenders even offer counseling to help you get another job.
If you use personal loans with bad credit to upgrade your home or help towards buying a new one, you can get credit or a deduction for the interest on the loan come tax season. Be aware that you’ll need tons of documentation that you actually spent the money for this purpose. After all, it’s the IRS with which you’ll be dealing.
When an emergency occurs, it usually happens in the middle of the night, on the weekends, on vacations, on holidays, or when you aren’t home. Personal loans with bad credit can be applied for online anytime of the day or night anywhere in the world you happen to be at the time. All you need do is fill out the application, upload your documents, and wait for acceptance.
We’ve all done it. We’ve gotten into something in which we were told that the price would be this, but six months down the road (when you’ve forgotten all about it) suddenly you’re paying extra. Those hidden charges are how most companies make some of their money, and they always hike up the interest rate. This is of benefit to the company, not to you.
Bad credit personal installment loans may not have hidden charges. You’re told the interest rate and payment amount up front. They’re both fixed. You won’t pay another penny. That’s of benefit to you, and one you won’t find elsewhere.
With any other lender or creditor, you may pay a penalty for paying off your loan early. Additionally, variable rates and payments loans means you never know what you’ll be repaying from month to month. Bad credit lenders don’t always operate that way. Personal loans with bad credit lenders give you fixed rates and payments. Paying it off early with no penalties attached to you is another perk, and a great one, at that.
Personal Loans with Bad Credit – Cons
There are some great advantages to taking out loans with bad credit. However, everything in creation has two sides. If it has an advantage, then it also has a disadvantage. Those considering checking with these types of lenders for one of their bad credit personal installment loans should consult the other side of the coin. They might or might not be able to handle the downsides of personal loans.
If you’re using a personal loans with bad credit to pay off credit card debt, you could be getting in over your head. By that, we mean that you’re only morphing from one payment type to another. You’re trading monthly credit card payments with ever-changing interest rates to one payment with a fixed interest rate. That leaves your credit cards free and clear to be used again. Consider freezing your credit cards (literally, it doesn’t hurt them) until the cash loans bad credit are paid off.
Higher Interest Rates
Bad credit, however, gets you higher interest rates. Loan Shop around for the best rates on personal loans with bad credit.
Smaller Loan Amount
As your credit score improves, you’ll be able to borrow more money at better interest rates. For now, though, bad credit lenders can’t give you the same loan as you would have gotten had your credit been better.
Defaulting On The Loan
If you default on a car loan or a mortgage loan, they come and take away your car or your house. In the case of bad credit loans, if you default on the loan, the bad credit short term loan lenders take you to court. A lien will be placed on any assets you possess, it goes on your credit report, and you will be liable for the court costs and attorney fees as well.
Not all lenders do this, but some bad credit lenders charge origination fees. This is a one to six percent fee to cover the costs of processing the loan. It’s paid up front instead of paying it back with the monthly payments. If your credit isn’t good, expect to pay a higher fee than if your credit had been good. Shop around for lenders who don’t charge this fee.
No Partial Payments
Some lenders allow you to pay money down on the principle, since most payments go toward repaying interest on the loan. Bad credit lenders aren’t of a mind to accept partial payments. You have to pay back the stipulated amount on the stipulated date for however long the loan is financed.
If you’re used to paying small amounts on credit cards each month, then a hefty monthly payment schedule might be too much for your finances to manage. Repayment of personal loans with bad credit can run into the hundreds, depending for how much the bad credit loan amount was. If your budget can’t handle that, reconsider bad credit loans.
Banks and credit unions are different from other personal loans offices. One thing they both need, though, is qualifying for the loan. Personal loans with bad credit might require more information and documentation. In addition to a picture ID, paycheck stubs, and bank information, be prepared to upload or bring with you whatever information the loan office needs such as information on assets.
Debt To Income Ratio
Taking out personal loans with bad credit increases your income to debt ratio. With bad credit to start with, this can go two ways. Paying it back on time and in full will improve your credit score. However, if your credit score isn’t what it should be due to too much debt, you might not get the loan in the first place. If you do get the loan, pay it off in order to decrease your income to debt ratio.
Each time you apply for a loan or for credit at a store, the loan officer or store manager checks your credit reports. Each hit on your credit report lowers your credit score. This will make it difficult for personal loans with bad credit lenders to give you a loan.
Begins A Bad Habit
Bad credit personal loans are meant to get you out of a bind, purchase something necessary, deal with medical problems, you get the picture. The problem is that it’s not too difficult to get one. When it’s paid off, it’s too simple to get another, whether you truly need it or not. Just like using your credit cards right after you get a bad credit personal loan to pay them all off, beware getting another personal loan just because you can.
Monthly fees, per check fees, and other sometimes hidden fees keep many people from using bank accounts. Why bother with plastic when it’s so easily boosted from your wallet or your pocket? Why bother with long lines, tired tellers, and traffic getting to the branch office? It costs less than a dollar to get a post office money order with which to pay bills and 45 cents for a stamp. Cash is king, dude.
The trouble is that personal loan offices need a bank account into which to put your personal loan money. When you deal with finance, you deal with transfers, ones and zeroes. Not having a bank account means to a loan officer that there’s nowhere to transfer those ones and zeroes. This messes up finance people’s heads, and you won’t get the loan.
Bad credit personal loan seekers often get pitched at the closing of the loan. For instance, the loan officer might try to get you to buy life insurance. He’ll tell you that for the price of a cup of coffee every day, you could protect your family from loss if you die. Life insurance is an important thing, and you don’t want some random loan officer selling you a policy. It almost always doesn’t cover much in the event of your death, added to the fact that it’s almost always more expensive than it’s worth. Skip the pitches.
Risk Of Scams
The more our lives are led online, the more scammers and hackers have chances to steal our information. Identity theft and loan fraud are two of the most prevalent types of online scams. These scammers will do and say anything to get your personal and banking information. If you’re looking for bad credit personal loans online, there are a few things you can look for in order to protect yourself:
No Credit Check
The only way a personal loan officer can judge whether or not you’ll repay the loan is by examining your credit and work history. Legitimate online loan companies will do two credit checks: a “soft” credit check to see in what state your credit is. The second will come following your agreement to rates and terms. This credit check is more detailed, and tells the loan officer just what rates to charge. Avoid anyone who advertises loans with no credit check.
Up Front Fees
The only fee a legitimate loan officer will ask of you is the origination fee. It’s paid the instant you get your money, and no more will be asked of you. Scam loan “officers” will ask you to give them your debit card as a sort of security for the loan. They’ll tell you they won’t touch the card, but have it on record. In reality, the instant your back is turned, they clean off the card and disappear. Avoid anyone asking for up front fees.
Sure Signs Of A Scam
- If it has to do with money, it has to be registered with a state. Call your state’s Attorney General to see if the online lender you’re considering is registered.
- If an email appears out of nowhere with an address saying it’s from, let’s say Amazon, make sure “amazon.com” appears at the end of the email address. If not, it’s a scam.
- Legitimate lenders have a legitimate address, either a brick and mortar address or an online address. Online lenders have company or corporate offices located somewhere. The address will show up on Google maps.
- Check the spelling and grammar. If you’re not well versed in correct usage and grammar, then use a free checker like Grammarly. Lots of scam artists are located outside the U. S. English isn’t their first language. When you see misspelled words, improper English usage, and other grammar mistakes, nine times out of ten it’s a scam.
Let’s review some real examples of why you might take our a Personal Loan even with Bad Credit
These are just a few scenarios involving people with a serious need for money, but no idea where to go for it. They have bad or no credit which means most lenders won’t give them personal loans with bad credit. www.creditry.com Many people in these and even worse situations turn to payday loans, credit card advances, or cash loans bad credit.
Abby’s house was too small. Abby, her husband, and her two toddlers bumped into each other no matter where they were in the house. She had a choice: she could add on to the house, or she could buy a new one. She had only been on her job for a year, though. Her husband was self-employed. They made enough money to get by, but not enough to qualify for a mortgage.
Brian had been hospitalized for an abdominal problem. He lived in great pain. The doctors told him an operation would get rid of the problem. The snag to that was that he’d be out of work for six months. There would be no telling if his job would still be there when he returned to work. His wife could pay the bills, but the job thing was a serious setback.
Let’s take a Few more to Drive the point home
Janet was going through a hostile, messy divorce. She got the house in the settlement, but she could seriously use another bedroom. The kitchen was so small she met herself coming in the door. Janet needed to renovate the house, but from where would the money come?
Will was so nice that he couldn’t turn anyone away when they asked to borrow money. Sometimes he was into negative numbers when someone asked. His wife needed expensive special medicine to right a medical wrong. He’d no idea where he’d get the money, and she needed it right now.
Karen’s car had died on July 4th, the transmission sitting on the road, so to speak. She could walk to work or catch the bus if it rained. Though she had a temporary solution to the problem, she needed money for a new car. It’s kind of difficult to carry groceries on the bus. Where would she get a down payment for a car?
Many people come across difficult financial situations
Jeff’s son had recently buried his wife. He traveled for his job and had nowhere to leave his little girl. Jeff therefore took care of his granddaughter, but the kid cost a lot of money. The shoes alone were breaking Jeff. He needed extra money, before the girl grew out of the shoes she was wearing that week. His retirement fund wasn’t enough to feed and clothe a growing little girl.
Anne’s house had burned a few years ago. Since then, she’d been living with anyone who would rent her a room or their basement. She’d love to get a place of her own, but she couldn’t work due to a disability. She made what she could online, but it wasn’t enough to pay for an apartment. Anne could use some extra money for a place of her own.
Neal was slowly losing his teeth due to diabetes and its resulting bone loss. He needed either dentures or dental implants, but both cost more money than his insurance at work would pay. Neal needed extra money for new teeth, but hadn’t an idea how to get it.
There are definitely advantages to getting a bad credit personal loan. Renovating your house, paying for specialty medicine, taking care of a growing granddaughter for your son, or laying out a down payment on a car are important things. However, the disadvantages are serious enough to give most anyone seeking a loan pause. We’re not trying to turn you off by any means, but a smart person looks at both sides of the coin.
You should also know that while you’re scrolling for personal loans, you’ll run across companies who locate personal loan companies for you. These companies are not lenders, rather they save you time and trouble. They talk to you, learning your needs, your repayment capabilities, and your time frame. Then they pair you up with the loan company that best suits your needs. This is an attractive thing to someone who’s never applied for a bad credit personal loan before. Now that you have all the facts, we’d love to hear what you accomplished with your loan.
Myra has written in a range of styles encompassing white papers, finance blogs, credit product descriptions, how-to manage finance pieces, professional articles for lawyers, finance experts, web designers and more. She has written for an equally wide range of clients on the topics of loans, personal finance development, credit reports and scores, taxes and many more.
Myra worked in a bank as a young person and has dealt with payment processors in the past few years in her financial services endeavors. She therefore understands how the system works.