A lot of people are turning towards personal loans for the financial breakthrough they need. Unlike other means of loan where poor creditworthiness might restrict your access to loans, personal loans cater for the financial needs of all and sundry. However, people with bad credits may have to pay a little bit higher interest rate compared to others. If you have a low credit score or even no credit and need a loan, personal loans are good options for you.
What are personal loans?
A personal loan is a kind of loan obtained from a financial institution and is used to finance some individual projects. They could be unsecured and have to be paid on an installment basis to fund necessary expenses or consolidate debt.
A personal loan can help you take better control of your finances and it convenient repayment schedule helps prevent you from falling into worse credit. The structured nature of the personal loans helps to avoid debt hanging over your head compared to the credit loans. In fact, it allows you develop a budget and stick to it.
How bad credit personal loans work
The first step is to go in search of a lender who caters to the need of people with bad credit scores. The lender would require you to meet some necessary eligibility criteria. Most often, this eligibility check involves looking at your credit history, existing financial condition, and your ability to repay the borrowed sum.
You could apply for your loan in-store or online. When using online, the sum is transferred to your nominated bank account or if in-store, you get to receive physical cash. You might get access to the funds the same day or over some business days; it all depends on how fast your lender is.
Features of personal loan for bad credit
Unsecured: You don’t necessarily require collateral to secure this loan as most of them come unsecured.
Fast process: The application process is relatively quick and easy. You could find out if you are eligible or not in a matter of minutes. Furthermore, when working with a sharp lender, you could have your loan the same day or the next business day.
Fixed rate: Fluctuations that come with the price of repayment of some loans are avoided with personal loans as the interest stays fixed.
Freedom of usage: You get the freedom to use your loan for different personal purposes, i.e., a vacation, a house renovation, or even debt consolidation (If you have debt on a high-interest credit card, it can help you save on interest charges and simplify your repayments).
Types of bad credit personal loans
These are the following options for bad credit personal loans available.
Payday loans or cash advances: These are short-term loans that require no collateral and should be paid back by your next payday. Cash advances are like payday loans in that they are a kind of short-term loan that provides a cash advance to borrowers which are to be repaid over a period.
Installment loans: This type of loan requires you to make equal installment repayment over a predetermined loan term. Just like the payday loans, it requires no collateral.
Title loans: These loans use the title of a borrower’s property, i.e., a car or motorcycle as security for obtaining a loan. Since they require a sort of collateral, they come with a lower interest rate compared to payday and installment loans. The sum is paid on an installment basis over a period, and default on payment could lead to the lender taking possession of your collateral.