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Do you have poor credit history? You can still get a loan. In this post, we offer some information about bad credit loans, also known as no-credit-check loans, so you can determine if one is suitable for you.
Are You Afraid You Can’t Qualify for a Loan?
Like many other individuals and business owners, you might run into situations when you will need a personal loan.
However, this process can be difficult for borrowers with poor credit history. Traditional lenders, such as banks, check your credit score before approving your loan. If you have defaulted on any financial agreement, skipped a repayment, or struggled to service your loan, it hurts your credit score and leaves a negative credit report.
If you have a poor credit score and you need a loan to cover a financial emergency, you are likely to end up with a bad credit loan, also known as no-credit-check loan. You’ll just need to persuade the lender to view you as creditworthy.
There are many benefits of bad credit loans. A bad credit lender that reports your good repayment history can help improve your credit score.
Here is what you need to know about bad credit loans to determine if one is suitable for you.
You’ll Get Quick Loan Approval Even with Poor Credit History
Getting a conventional loan is not as easy as advertisers make it seem. You have to fill in the application document, fax it to your bank, or physically visit their office.
After you’ve finished your application, you have to keep calling your loan agent to inquire about the status of your application. This entire process may run into weeks. It is simply not suitable for emergencies.
Conversely, lenders generally approve bad credit loans the same day you apply. For example, you could apply in the afternoon and have the cash in your account before you go to bed.
In essence, speed and convenience are one of the foundations of bad credit loans. Furthermore, the rate of approval for bad credit loans ranges from 80 to 90%. This means you have a greater chance of getting approval for your loan.
Bad Credit Loans Have Higher Interest Rates
Bad credit loans have higher interest rates because of the high-risk nature of the bad credit loan business. Think about it: Risk-taking is part and parcel of every business, regardless of industry. But a lender who gives you a loan without considering your credit score and history is someone who is taking a high risk. In addition, many bad credit loans are unsecured, making them even riskier for the lender.
The bottom line is that, for the lender, lending you cash is a risk. Therefore, the lender wants a high reward for that loan. This is why lenders of bad credit loans impose a high interest rate on their loans.
Use a Bad Credit Loan to Improve Your Credit Score
The main reason many borrowers shun conventional loans is because they understand they have a bad credit history. But did you know you can use a bad credit loan to fix your poor credit history?
Timely repayments of your bills and loans help improve your credit score. On the other hand, if you fail to repay your loans on time, you get listed as a bad debtor. In this case, you won’t qualify for any loans at all. This means that any time you acquire a loan, it should be top of your concerns to repay the loan on time. When you do, you won’t hurt your credit score, and you might even improve it.
Besides, installment loans involve multiple repayment periods. Making the right choice in this regard will enable you to pay on time. Then you will be adding positive information to your credit report. This will help you to build a strong financial foundation.
However, remember that a bad credit loan will only help you improve your credit score if you are responsible about how you repay it. In the end, raising your credit score ultimately depends on your ability to manage your debts and finances responsibly.
You Can Borrow Large Amounts of Money Even with Poor Credit History
People with bad credit scores are known to be high-risk borrowers. This is why traditional and conventional lenders turn down their applications.
But bad credit lenders allow you to borrow copious amounts of money even with a bad credit score. This allows you to make your financial future more secure.
Your Poor Credit History Won’t Be a Problem with a Bad Credit Loan
Your credit history shouldn’t worry you when you want to take a bad credit loan. Does this sound interesting enough?
Bad credit loans can help you through a financial emergency, even when your credit history is poor. People with poor credit histories don’t qualify for conventional loans. Traditional lenders won’t approve your loan application when you have a bad credit score even if you expect your income to increase soon.
However, it is an advantage if you expect your income to increase over the next few months while applying for a bad credit loan. Lenders who give bad credit loans are interested in your financial future.
Find the Right Type of Loan for You
When applying for a bad credit loan, you are likely to be offered one of the following:
- Guarantor Loan: This type of bad credit loan allows you to borrow money by designating a family member or friend as a guarantor for your loan repayment. A loan guarantor is a person who agrees to pay your loan if you default on repayment. This person generally has a better credit history than you. The lender sees the guarantor as an added layer of security or insurance. This makes the loan less risky.
- Unsecured Loan: With an unsecured loan, you don’t need an asset or property, such as your car or home, to use as collateral when borrowing money. Most unsecured loans are given based on your creditworthiness. You also don’t need a guarantor.
RELATED ARTICLE: WHAT ARE THE BENEFITS OF UNSECURED LOANS FOR YOUR SMALL BUSINESS?
Use a Bad Credit Loan for Emergency Expenses
One major benefit of bad credit loans is that they allow you to borrow money even with a poor credit history when an unforeseen calamity occurs that did not prepare for. Such emergencies may include:
- Funeral Emergencies: Though it might be difficult to think of, the unforeseen death of a loved one can throw anyone off balance and into panic mode. Besides the emotional effects, funerals are also expensive. You factor must in the funeral home costs, the casket, and the burial arrangements. But bad credit loans can cushion you in such events. You can choose to take a bad credit loan to cover for a loved one’s funeral expenses.
- Medical Emergencies: Medical expenses are another reason why many people seek out bad credit loans. Medical procedures that could require you to borrow money include dental work, fertility treatments, cosmetic surgeries, or any other medical procedure. Many of these procedures and treatments can cost $5,000 or more.
A good feature of bad credit loans is that you can use the money for whatever reason you wish. The lender doesn’t dictate to you how to use the money. Most conventional loans have to be used for a specified purpose. For example, you can only use a car loan to buy a car or a mortgage to buy a home. With a bad credit loan, once it has been approved, you can use the money to take care of any expenses.
Here Are Some Key Takeaways
Bad credit loans are suitable for people with poor credit histories who are looking for financial help. You can use bad credit loans to take care of different types of emergencies. They are suitable because they take less time for approval. They have higher interest rates because of their high-risk nature. You can also fix your bad credit score by repaying your loan responsibly on time.