A Few Tips if You Are Taking out Loans with Bad Credit

By | October 21, 2015

Once upon a time, having debt would land you in debtors’ prison, where you would stay until your family was able to pay your debt off. You would receive no food or water, depending on the kindness of others and the hard work of your family to survive through those harrowing times. Unsurprisingly, many people actually died simply because they had debt.

This was something that governments quickly realized was an unsustainable situation. Men who should be laboring and working the land were dying in prison because of money, money they couldn’t make because they were in prison. So, debtors’ prisons were removed. Instead, credit files were created. These files assigned every person a score, and this score determined whether or not they had been paying their debt. If their score was poor, then they would not be provided with any further debt. Time periods were also determined during which someone could ‘prove’ themselves worthy of credit once again.

Since the days of the debtors’ prisons, having debt – or bad credit – has had a huge negative social stigma attached to it. However, the recent global financial collapse changed all of that. Suddenly, only very few people still had good credit, often through no fault of their own. This puts us in the current situation where everybody accepts that bad credit happens, but lenders still don’t think people are worthy of more financial products.

The subsequent development of this is that various bad credit loan constructions were created. There are pawn loans, payday loans, logbook loans and more. Many people look for a variety of different installment loans specific for people with bad credit and they find many different results. If, however, you apply for one of those loans, you do have to know what you are letting yourself in for.

A Few Tips

– Understand that interest rates on bad credit loans are always higher than with other loans. Also, the shorter term your loan is, the higher the interest rate is likely to be.

– Short term loans tend to be loans in very small amounts, ranging from $50 to about $1,500.

– There are many different payment options available to you, ranging from weekly to quarterly. Look into what is most affordable to you.

– Make sure you can pay your loan back. If you have bad credit and you struggle to pay back a bad credit loan, you will see your credit rating reduce significantly. Additionally, these lenders often have very tough and quick penalties for non-payment, including repossession.

Finding a loan if you have bad credit isn’t difficult. Do, however, make sure that you find one that offers you the best possible rates and deals. The interest rate is very important, as is the length of the loan. Do also look into early repayment penalties and fees and how long it will take before your loan amount is in your bank. Do your research so you don’t end up in even more financial trouble.

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