Over the past decade, there has been greater access to credit facilities than ever before. There are more lending options to meet your different borrowing needs. But most times, lenders need to cut their losses by giving funding only to trustworthy people. That’s why we have credit scores or ratings. This way, lenders can determine which borrowers have the potential to repay on time.
If you’ve missed out on a repayment period and defaulted on a previous loan, there’s a high chance that your credit score has gone bad. The good news is that even with bad credit, you can still get access to loans. In this article, you’ll find out all about bad credit loans, their advantages, and how you can apply for one.
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What Does It Mean to Have Bad Credit?
A credit score is a reflection of borrowing practices and repayment history. It is typically represented in three digits and shows intending lenders how likely you are to repay a loan. If you have bad credit, it simply means you have been classified as a risky borrower.
Having a bad credit score may arise as a result of having lots of debts, unpaid loans, or failing to repay your loans on time. Many lenders consider a credit rating of less than 580 to be a bad credit score.
There is a high possibility that you’ll get fewer approvals if you have a bad credit score. Lots of lenders may not consider you for loan offers, and if they do, you may face high-interest rates or relatively unfair terms.
Is It Possible to Get Loans With a Bad Credit?
Generally, a bad credit score means that future lenders will not consider you dependable, and it will be more difficult to secure funding. However, all hope’s not lost. You can still get loans, even with bad credit. For your loan needs, you can find online loans for bad credit on the website of WeLoans. (WeLoans is a broker that is famous for payday loans for bad credit.)
Several online lenders offer special products that are designed to provide financing for bad credit borrowers. Also known as bad credit loans, these lending offers to rely more on your actual ability to repay than your credit score.
So, it’s likely that the lenders or brokers may only perform a soft credit pull on your information. You will also need to provide a source of income, like employment or social security benefits, before you can receive bad credit loans.
Types of Bad Credit Loans Available to Borrowers
Bad credit loans come in different forms. Eric Bank from WeLoans, who is an expert having rich business and finance experience, said that it is necessary to compare different bad credit loan options with their terms and rates. Here are some of the best types of bad credit loans that you can take out.
Payday Alternative Loan
From the name, you can already tell that this is a type of loan that you have to repay on your payday. However, compared to regular payday loans, payday alternative funding is available at credit unions. They also have lower APR and fees than you’d get if you opted for the common payday loan. It is short-term funding, so you must repay within six months or less.
Unsecured Personal Loan
This is the most common form of bad credit loan available. As an unsecured loan, you do not have to put in any form of collateral with the lender before you can qualify. Personal loans also offer long principal amounts and repayment terms, up to 84 months. You can get multiple unsecured personal loan choices at brokers like WeLoans or other reputable direct lenders.
Installment Loan
An installment loan is any type of loan that allows you to borrow a sum of money and pay it over specific periods. There is a fixed number of times or installments that you have to repay an installment loan. Compared to other options, it offers you a larger sum.
Cash Advance
If you have a credit card, you can take out a cash advance on it. This type of funding involves taking out more cash than your credit card limit. Credit card advances do not require your credit score, but you’ll need to pay higher interest rates on each amount of cash you take out.
Title Loans
Owners of vehicles can also get bad credit loans using their cars as a form of collateral. A title loan requires you to transfer the title in your car to a lender and use it as leverage to secure funding. As long as the vehicle is yours and there is no lien, you can take out a title loan in the short term.
How to Apply for a Bad Credit Loan?
The very first step in securing a bad credit loan is choosing a lender or broker you can apply to. WeLoans is one highly recommended broker that connects you with dozens of reputable lenders and gives you multiple loan offers to choose from. Here’s a quick look at how to apply and get approved for online loans for bad credit at WeLoans.
Fill Out an Online Form
On the WeLoans website, you’ll find an online form requesting your personal and financial details. Fill it with accurate details and submit.
Get Offers and Choose One
Your information will be sent to multiple lenders, and you’ll receive loan offers from them in return. Browse through the offers and select the one that most suitably meets your needs.
Sign Loan Agreements and Receive Funding
After you select a loan offer, you’ll need to complete the necessary paperwork. Once done, you can expect funding to arrive in your account in one to two business days.
What are the Pros and Cons of Getting Bad Credit Loans?
There are advantages and disadvantages to getting bad credit loans from lenders. Here are some of them that you should consider.
Pros
Below are the most common benefits of available bad credit loans.
- They have a fast and easy application process. You can also receive funding in only a few business days.
- Borrowers with poor credit scores or no credit rating at all can enjoy loan offers.
- There are different options for you to choose from.
- Taking out some types of loans may help consolidate debt and build your credit score.
Cons
On the flip side, bad credit loans also have disadvantages that you should know about.
- Most types of bad credit loans have high-interest rates to cover the risk of borrowing large amounts.
- Taking out title loans may require your vehicle as some form of collateral. Some secured bad credit offers also require collateral. If you default on the loan, you may lose your property to the lender.
- If you’re not careful, you will only pile up debt by taking bad credit loans. It is also easy to get trapped in a debt cycle.
Final Thoughts
Having a bad credit score doesn’t stop you from accessing credit and financing facilities. Thankfully, there are more lenders who are willing to provide special loans to bad credit borrowers. While many of these loans usually attract higher interest rates, they can be a good way to meet your pressing needs and consolidate debt. If you need to get a bad credit loan, try using WeLoans to access a wide range of offers from some of the most reputable lenders in the market.
