How Can You Get a Bad Credit Loan in a Financial Emergency?
Let us explore bad credit loans and how they may or may not be of help to you when you have emergency expenses and no cash to deal with them.
Are Bad Credit Loans Safe?
They are safe to apply for and easy to do. Some critics believe the high fees associated with these loans should stop you from considering one. However, most people with bad credit have no other options and have already tried other ways to get the cash they need in an emergency. The high fees may actually be less than utility setups, redeposit, and start-up fees or high bank NSF fees if you are trying to cover some checks you issued.
Each situation is unique, so do your homework and judge whether it is the best option for you and will work for your circumstances.
Why Not Improve Your Credit Score Before You Apply for a Loan?
This is a good strategy if you can take the time to do it. With higher credit, you can get better and larger loans with lower costs associated with them.
Of course, this strategy takes time, and those with bad credit often can not wait to get a loan. In these situations, a bad credit payday loan may be the best and only option.
What Is a Bad Credit Score?
A bad credit score is defined differently by different experts. Generally speaking, the higher your score number, the better your credit. Your credit score can range between 300 and 850. Scores under 600 are considered poor by most experts, and scores under 500 are very poor.
There is a newer system called Vantage that may be used for your score, but it follows many of the guidelines of the traditional FICO score models.
What Affects Your Credit Score
There are 2 major factors affecting your credit scores. They are your payment history and your credit utilization rate. They are explained below:
Payment history: Your payment history makes up 35% of your credit score. Most people have lower scores because they miss payments or even default on payments. The more often you pay late or default, the worse your score will be affected. The more recent your poor payment history, the greater the negative impact on your score.
Amounts owed: This is called your credit utilization ratio, and it accounts for 30% of your score. Your credit utilization ratio is the total amount you owe on all credit (e.g., credit cards, car, home, etc.) compared with the total amount of credit that you have on the same accounts. If you add up all your credit limits and divide all your credit balances by the total credit limit, you get your credit utilization percentage. You should try to keep this ratio at 30% or less. Those with high credit scores have their utilization rate under 6%.
Credit history: Credit history makes up 15% of your credit score. This portion of your score is based on the average time your accounts have been opened. The older your credit accounts are, in average age, the better your credit score.
New credit: If you apply for new credit accounts in a short period of time, it may negatively affect your score. This factor makes up 10% of a FICO score.
Credit mix: Scoring bureaus like a good mix of credit (such as having a home mortgage, auto loan, credit cards, and so on). If paid on time, it demonstrates your ability to manage your finances well and will improve your score. The opposite effect happens if you do not manage your payments well.
How Does a Bad Credit Score Affect You?
Most people know that a bad credit score costs you money.
You pay higher interest rates. You are considered higher risk with a bad credit score, so any loan you are able to get will come with much higher interest rates. These can add up to tens of thousands of dollars in additional expenses over time.
The other problem is you may not be able to get a loan for a home, car, or even an installment loan to consolidate your debts. You may be denied credit! Many rental properties now check your credit, and you could be denied an apartment due to bad credit. Even some employers now check credit, so a new job could be at risk due to your bad credit score. There are many reasons to work on improving your credit score.
How to Improve Your Bad Credit
There are many free services where you can see your credit score, and it will not impact it. Credit Karma is very popular and good service. Once you know your score, you can create a plan to improve it. However, you can start immediately with these simple steps:
- Pay your bills on time. Since payment history is the #1 factor in your credit score, your highest priority should be to pay all your bills on time.
- Pay off your credit cards, starting with the smallest debt owed. You will have success by eliminating one debt at a time. Do not close the account when it is paid off as the “open” credit limit will help your score going forward.
- If you cannot get a credit card, you may be able to get a secured credit card. This card requires a deposit from you, but the companies that offer them do report your payment to the credit bureaus. Pay on time, and it will help your credit.
- Consolidate your bills. If you can get a consolidation loan, you may be able to substantially reduce your monthly payment and have fewer bills to track as well. Your interest rate is often lower on a debt consolidation loan.
- Try to fix errors in your credit report. After getting a free copy of your credit report, you may find errors that you can dispute and fix that will improve your score. It is estimated that 1/3 of all reports have at least 1 error.
What Is the Difference Between Payday Loans and Bad Credit Loans?
There really is no difference between a payday loan and a bad credit loan. Why? Because if you have bad credit, you will likely only be able to obtain a bad credit payday loan. Traditional lenders will not loan to you, and credit card companies will not want to give you a new card or expand your credit limits.
Are Bad Credit Loans Good for Emergency Situations?
This depends on one major factor: can you repay the loan when it is due? Since bad credit payday loans are paid back in one month or less, it is critical you are sure you can repay your loan when it is due and not delay the repayment, which will cost you additional fees and penalties. If you are uncertain you can repay the loan, you should not get one.
Secured vs. Unsecured Bad Credit Loans
The simple difference is that a secured loan requires you to put up collateral (something of value) to obtain the loan. For example, you give your auto title to the lender. Of course, if you are late on payments or miss payments, the lender can seize your vehicle and likely sell it off to cover the debt (and then some). You have no recourse if this happens, so getting secured loans is not recommended even in emergencies.
Obvious Pros for a Bad Credit Loan
The simple pros are: a bad credit loan is fast and easy to apply for, and if you are approved, you get cash in one business day in most cases.
Obvious Cons for Bad Credit Loans
There are several cons for bad credit loans: you have to pay it back on your next paycheck or within 1 month depending on your state laws; you will pay high fees for such a loan; and, the loan amount will typically be $500 or less although some states allow for up to $1,000 loans.
How Can You Get Bad Credit Loan with FaaastCash?
Nothing could be simpler. Just go to the loan request form page on the website (smartphones work great), complete the form, and submit it. It is fast, easy, and secure.
It only takes a few minutes. You get an answer in 90 seconds or less. About 80% of applicants are approved for a loan.
Keep in mind, you are never obligated to accept a loan offer. If you do not like the terms and conditions offered to you, simply reject the offer.