The Bad Credit Loan Market is Alive and Well
Today’s unbalanced economy has left millions of Americans with credit scores that are below average. Because of this, the bad credit loan market is alive and well. While credit scores have never been easier to access, too many borrowers fail to track or even check what their score is. In fact, a recent NerdWallet survey found that 11 percent of Americans have never bothered to check their credit score even once. So, what does this mean when it comes to lending? It means that the bad credit loan market is likely here to stay.
The Bad Credit Loan Market Isn’t Going Anywhere
Bad credit online loans are usually used by those who have lower incomes as well as by people who are facing financial emergencies. These are individuals who have few options when it comes to borrowing money, which is an unfortunate side effect of bad credit. These types of loans can be costly since they often come with high interest rates and fees.
According to studies, while many Americans continue to take out loans with bad credit, too many of them don’t understand how bad credit is affecting their lives.
How Bad Credit Affects a Person’s Everyday Life
Most people are aware that their credit rating impacts their ability to borrow money as well as the terms of their loans when they are able to borrow. What too many people are oblivious to is how bad credit affects them in other ways.
The Los Angeles Times reports that about one-quarter of Americans are not aware that their ability to rent an apartment may be affected if they have bad credit. About 45 percent of them don’t know that if they have poor credit, then they could pay a higher car insurance premium. In addition, about half of the people surveyed didn’t know that bad credit could make them ineligible for cellphone service or that they could wind up paying higher deposits for their utilities.
Tips for Getting Loans with Bad Credit
Tips for getting loans with bad credit include locating a lender who is transparent about the fees and interest rates charged for the loan. Borrowers should also search for a lender who is flexible on the terms and willing to consider more than just the person’s credit score. Borrowers should take steps to avoid loans with excessive interest rates and fees. It’s also a good idea to steer clear of the kind of borrowing situation that traps them in a debt cycle.
Borrowers with low credit scores may qualify for bad credit loans by making on time payments to other lenders. These borrowers may also qualify for funds by being employed and making enough to cover the necessities.
Using Low Credit Loans Wisely
When it comes to bad credit online loans, it’s important to request and use them wisely. Borrowers should make sure that a lender is legitimate before requesting a loan. It’s also a good idea to shop around a bit for the best rates and terms. With bad credit online loans, borrowers must attempt to repay the amount borrowed in full as quickly as possible.
Bad credit loans are the kind of loans that people should only take out if they’re in a dire financial emergency. This may include running out of a critical prescription or paying to repair a flat tire. If the person’s life or livelihood is at risk, then that’s the time to seek this type of loan.
Loans don’t solve the problems of those who have bad credit. Often, excessive debt is a sign of bad financial habits that the borrower needs to address. However, when loans are used wisely, they can help a person get a handle on his or her finances.
Keep in mind that some lenders won’t even consider approving a loan for someone with a credit score that’s below a particular number. Other lenders glance at credit scores, but it’s less important to them than a person’s income and payment history.
What to Look for in a Lender
When borrowers have bad credit and need a loan, they should search for a lender that reports credit history to the three main credit bureaus. This helps borrowers improve their credit as long as they make their payments on time. Also, if time permits, borrowers should look for lenders that give them the option to reduce their interest rates over time. To receive this benefit, borrowers must demonstrate responsible financial behavior like reducing their overall debt and putting money into savings.
Asking about loan qualification with a soft credit check is also something that industry experts recommend. Many lenders will agree to a soft credit check because it lets the borrower know his or her rate and monthly payment before the loan is processed. This allows borrowers to avoid a hard check initially, preventing a ding on his or her credit score if he or she should back out of the loan.
Things that People with Bad Credit Should Know
The Huffington Post reports that bad credit today doesn’t mean bad credit forever. Those who have a low credit score can increase it with time. Making debt payments when they’re due allows people to climb out of a bad credit status. To do this, it’s important for a bad credit borrower to know what his or her credit score is and what the reports are showing.
Individuals with credit scores on the low side are usually unable to gain access to a traditional credit card. This takes many people by surprise. In fact, the only type of credit card that people with bad credit can often get is a secured card. Because this type of account requires the holder to send cash to secure the funds, many people are forced to turn to bad credit online loans to get the cash they need when they need it.
Another thing that people with bad credit should know is that borrowing money is expensive for them. Instead of paying money back with a low teaser rate, these individuals are paying back their loans and a large amount of interest. From automobile loans to short term ones, people with bad credit pay more to borrow.
A Loan Product That’s Here to Stay
The poor credit loan market isn’t going anywhere until traditional financial institutions decide to relax their borrowing criteria. While these kinds of loans are notorious for their high fees and excessive interest rates, they are a lifeline for bad credit borrowers who are faced with a financial emergency. Those who take the time to understand their loan and focus on returning the funds back to the lender when they’re due are making the effort to manage their loan wisely.