Bad Credit Loans are as Available as Ever, Experts Proclaim

An unfortunate reality of today’s financial world is that those who need to borrow money the most typically have the toughest time doing so. People who have bad credit may think that getting the money they need is impossible. However, bad credit loans are as available as ever for those who know where to look.

Despite Regulations, Bad Credit Loans are Still Around

GoBankingRates reports that bad credit loans may be the only option for individuals who have suffered credit setbacks. It’s much easier for people with bad credit to gain access to money through these kinds of loans. However, unsecured bad credit loans come with excessively high interest rates. Because they do, many borrowers wind up trapped in a cycle of debt.

Those who are considering bad credit loans should enter into this type of borrowing agreement cautiously by making sure that the situation is dire enough to necessitate the loan. A major benefit of bad credit loans is that they are available to those who have no other way to get the money that they need. Lenders of unsecured bad credit loans also provide the funds quickly. The high fees and the limited amount that people can withdraw are the downside to the lending option.

Bad Credit Borrowers can Still Compare Bad Credit Loans

While it may seem unnecessary, borrowers of unsecured bad credit loans should still take the step of comparing their loan options. Missed payments or high credit card balances tank a borrower’s credit score.

As borrowers begin comparing bad credit loans online, it’s important for them to check rates and monthly payment amounts even when their options are limited due to a low credit score. Borrowers should also consider taking out a loan through a company that reports to the nation’s three main credit bureaus. This gives a borrower the opportunity to improve his or her credit score. However, in this case, it’s more important than ever to maintain an on time payment history.

A borrower of a bad credit loan may find lenders willing to lower their interest rate over time if he or she displays responsible financial behavior. This may include starting or adding to a personal savings account or paying down the amount of debt that he or she currently owes.

The Average Amount of Interest that Borrowers Pay Based on Credit Scores

Someone with an excellent credit score, one that ranges from 720 to 850 will pay an estimated annual percentage rate, or APR, of 10.94 percent. People with good credit scores that are from 690 to 719 will pay an estimated APR of 14.56 while individuals with average credit scores that run from 630 to 689 will pay 19.84 percent in interest. A bad credit score is from 580 to 629. Borrowers with bad credit scores will pay an estimated APR of 28.64 percent. People who have credit scores that are under 579 will be unlikely to qualify for a loan.

Low credit scores make lenders nervous, and when they aren’t secure that a borrower will repay a loan, they charge more. Borrowers cannot rely on getting money from lenders. Today’s lending environment is more hostile than it was in the past due to heightened federal and state regulations. Along with this, many lenders tightened up their internal protocols after the Great Recession. These factors are making the current lending environment a tough one for borrowers.

Borrowers Can Request a Soft Credit Check to Preserve their Current Credit Score

When it comes to getting bad credit loans online, the last thing that a borrower wants to do is impact his or her credit score even more just by applying. Some lenders are willing to pre-qualify borrowers for a loan by using a soft credit check. Borrowers with low credit scores should search for these lenders because it will permit them to see their rate and payment amount before the loan is officially approved.

A soft check gives the lender an overview of a borrower’s finances. To receive final approval, lenders will need to complete a hard credit check. Multiple inquiries of this magnitude can lower a borrower’s credit score. Individuals should keep this in mind and apply for loans cautiously.

Other Types of Bad Credit Loans Online

While many traditional banks and credit unions do not issue bad credit loans online, a number of lenders do provide personal loans to people who have credit scores that are around 600. Bankrate reports that there are online lenders that deal exclusively in bad credit loans to help borrowers consolidate their debt. This may help them get out from under it.

Debt consolidation loans can help people improve their credit scores because these types of loans are often defined as installment loans. Credit bureaus generally don’t penalize borrowers as severely for having installment loans. To qualify for consolidation loans, borrowers must have a reasonable debt-to-income ratio. This reassures the lender that the borrower will be able to pay the money back.

What are the Warning Signs that Someone Has Bad Credit?

While people have free access to their credit scores, the National Foundation for Credit Counseling reports that 60 percent of the country’s consumers haven’t taken the time to check theirs in more than a year. reports that a borrower may have bad credit if he or she is paying a higher rate of interest than what a lender is advertising. People who are only making the minimum monthly payment on all of their debt may also be on the wrong path when it comes to their credit score.

Borrowers who tend to overdraw their checking accounts and pay many of their bills late are likely to have bad credit. If a cell phone company won’t issue a contract to a consumer or if a person has trouble getting a housing lease, then these are other signs that a person is struggling with his or her credit score.

How Can Bad Credit People Improve Their Scores?

To improve a credit score, consumers should focus on paying their bills off in full every month. If a borrower is unable to pay the bill in full, he or she should at least make the minimum payment. Over time, this will improve a person’s credit rating. Payment history counts for 35 percent of a borrower’s credit rating while the total amount of debt is 30 percent of the rating. To keep their credit in good standing, borrowers should try to avoid using more than 30 percent of the credit limits on their credit cards.

Are Bad Credit Loans Here to Stay?

At the moment, bad credit loans are as available as ever, but are they here to stay? Maybe, but federal regulations could remove these types of loans from the borrowing landscape. People who need bad credit loans should take them out with caution since many borrowers wind up in a debt trap because of them. Debt should always be paid on time and quickly. To learn more about bad credit loans online, visit the Personal Money Store.