If you have a bad credit standing and you think that lenders will view you as a high risk borrower, your only hope to get financial aid is through bad credit loans. These are specifically created to cater to people who do not have the best credit history to back them up.
The great thing about a good credit score is it allows you to get a loan without difficulty. That means you enjoy low interest rates for being a low risk borrower. Because you have displayed good behavior in paying off your debts and maintaining a good debt to income ratio, that is your reward.
But if not, you still have the chance to receive financial assistance. Although, these will most likely be coupled with strict payment terms, long wait for approvals, high interest rates, various fees and high penalty charges.
Different Kinds of Bad Credit Loans
If you are in dire need of financial aid, here are some of the loan types you can apply for. Most of these will not take notice of your bad credit score. However, you need to be aware that lenders will find other means to protect themselves from the risk that it takes to have you as a borrower.
Secured Loans. This type of loan means you will offer the lender collateral to gain approval. The most popular type is a home equity loan. You put up your home, car or any other valuable that you own and you will give the lender the right to take possession of it in case you fail to make your payments. This loan will allow you to get a huge amount since the lender is required to level it with the value of the collateral you are offering.
Unsecured Loans. In contrast to the previous type is the unsecured loan. Signature loans are a popular option for this. It literally means the lender will only have your signature as proof that you promised to pay off your debts. Depending on the situation, the lender may ask you to get a co-signer or a guarantor. In case you are unable to pay for your debt, this person will take up the responsibility of paying off your loan. No equity or collateral is needed here. However, you may have to settle with a smaller amount and of course, high interest rates.
Payday Loans. This type of loan is probably the most dangerous because it can really bury you in debt. You should only opt for this if you are sure you will be getting a huge amount in the next couple of days. This is characterized by its short payment term (usually you are required to pay in a couple of weeks or months) and the high interest. If you are unable to pay within the due date, your debt will continue to accumulate until you are able to pay it off. The annual interest rate can reach up to 400% of the original loan amount.
A 400% APR means that for every dollar you borrow, you will have to repay four dollars.
Credit Card Loans. If you haven’t maxed out your credit card yet, you can opt to get a credit card or cash advance loan. The debt that you will take out will be included in your monthly bill and will have the usual credit card interest rate.
If you want to know more about your options, please feel free to talk to one of our financial experts. Taking out a loan to settle your other loans may not be the best way for you. Give us a call or fill up the form on the right side of this screen. NationalDebtRelief.com is here to help.