Should You Take Out A Bad Credit Personal Loan?
So, you are at a point where you really need money, but you have a very low credit score. The question is, should you take out a bad credit personal loan. Can you take out personal loans with bad credit? The answer to whether or not you should depends on what kind of lender you can find, but the answer to can you is yes. There are many different types of lenders and for a personal loan bad credit is something that a few of them will deal with regularly and have options for. However, you must take special care not to fall into one of the traps set by unscrupulous lenders for those who are naive about credit and personal loans in general.
First, what exactly is a personal loan? Generally, a personal loan is an unsecured loan by some type of financial institution that allows you to use the money for a vehicle purchase, furnishing your home, or anything else that you want to use the money for. In most cases, you need to have a good credit score and an established payment history in order to get a personal loan. However, there are a few options for getting personal loans for bad credit. Many of them are extremely high interest, or terms that are ridiculous, but some are from reputable lenders that are truly trying to help.
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Let's talk about some of the bad options for bad credit personal loans first. One such loan is a check loan. A check loan allows you to write a post dated check to a company for a short period of time with an extremely high rate of interest, usually around 25-30 %. This type of loan is also called a payday loan because you will usually be required to pay it off on your next payday, and the amount of the loan is based upon your recent pay stubs. So, if you take out a loan for $200 then you will be required to pay the loan off on payday in the amount of approximately, $250-$260 dollars.
Many times borrowers can't afford the entire payment, and must pay the interest only. That means that you'll pay $50 dollars on your loan, and in two more weeks you'll owe another $250-$260 dollars. Another type of personal loan to watch out for is the signature loan. This type of loan usually has an interest rate right around 20% and may be a three or six month loan. If you have bad credit, this type of loan may be your only option, but it is a good idea to avoid a 20% interest rate if you can since a conventional personal loan from a bank will charge much less.
A bank or other lender may be willing to give you a personal loan if you can prove that you have the money to pay back the loan, as in a solid income, and that your credit history that gave you such a low score hasn't been recent and that your more recent history of payments has been solid. For instance, proving that you have paid your rent or utility bills on time may cause a regular lender to take a chance and approve you for a personal loan. You'll want to talk to your bank first, and then to smaller lenders and see what you can work out with them.
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Posted in Business Post Date 12/18/2019