Bad credit loans are often marketed as the best alternatives to those who need cash but do not have good credit scores. They are not all glory because they come with higher-than-usual interest rates. That is why when you are approaching the issue of bad credit loans, you have to be armed with the right amount of knowledge to enjoy the experience. The Internet is littered with information that you can use but you have to be careful to avoid marketing ploys. So to make learning easier for you, here are the top five things that you must know when applying for bad credit loans.
1. You have to know the costs
Aside from the interest rate, bad credit loans operate much like your traditional lenders. There are still a bunch of fees and charges that may apply, depending on your lender and your payment history. So before you send in your application, take the time to read the lender’s website and know the total cost of bad credit loans.
There are loan calculators that are available for free either on your lender’s website or on any other website on the Internet so learn to make good use of them.
2. Check if there is a pre-payment penalty
.The way some bad credit loans are outlined is that the interest is divided equally among the number of payments that you need to make. Hence, if you pay up earlier than expected then that means that lender will not be able to collect the full amount of revenue. It is in these cases that pre-payment penalties happen.
So before you sign a contract for bad credit loans, you have to know first if there pre-payment penalties involved. There’s an easy way to know this and that’s by checking the FAQ page or by contacting live support.
3. Know if there are any limitations on the use of the money
Certain types of bad credit loans can be used for specific purposes. For instance, if it’s a car loan then it will only be spent to buy a vehicle. The same thing goes with home loans and so on. So even if it’s labeled as bad credit loans, you still need to check the limitations.
However, if it says personal bad credit loans, then that means you can use it for whatever purpose you have in mind. Since it’s personal, there will be no need to check how you used the money.
4. Know if you qualify for the bad credit loans
Generally, the requirements include proof of employment, proofs of US citizenship and age, a copy of an active bank account and a duly accomplished electronic form. However, there are online lenders that only serve certain groups of people. For example, these lenders may only offer bad credit loans to home owners, or those who can present some sort of collateral in exchange for a no credit check transaction.
If you have no collateral to present and your credit history is below the average, then you should make it a point to look for lenders who can provide you with bad credit loans without requiring a lot. Don’t worry, there are thousands of these agreeable lenders of bad credit loans in the Internet so you should have plenty of options still.
5. Find the best payment plan
One of the best features of bad credit loans is that there are several payment plans for you to choose from. You can pay for the bad credit loans one time or break it down into installments. If you need more time to pay, you can ask for an extension but this isn’t really recommended because rollovers would mean that you will be charged with the usual fees again.
Bad credit loans can become life-savers in cases of emergencies. However, you should not consider them every month. Remember that bad credit loans may be short term but they have higher-than usual interest rates. Only use them when really needed.