If you need money to make payments or consolidate credit card debts, the first thing that comes to your mind is a loan. However, it is not that easy especially if you have low credit scores. If you have low credit scores, it can limit your borrowing options.
The good news is you can consider Bad Credit Loans in VA. Before you commit, here are the things you need to know about bad credit loans:
What is the difference between bad credit loan and payday loans?
There is a big difference when it comes to repayment time and interest rate of bad credit loan and payday loans. A bad credit loan is an instalment loan, which means you are expected to pay every month for the agreed length – usually 12-36 months.
Payday loans, on the other hand, are tied to your next paycheck. In this type of loan, you are expected to pay within two to three weeks after the loan release. The interest rate on payday loans is higher compared to bad credit loans.
What are the advantages of bad credit loans?
The advantages of bad credit loans include the following:
- Quick: loan applications are available online. If you are lucky, it will only take a few hours to get a response.
- More options: the number of lending agencies doubles every year. If you compare, you will find a loan with an interest rate you can afford.
- Repayment term: the repayment could stretch from 1 to 5 years. This will, of course, depend on the lender.
- Credit score: if you make on-time payments, there is a huge possibility that your credit score will improve.
What are the disadvantages of bad credit loans?
The disadvantages of bad credit loans include the following:
- Higher interest rates: since you have a lower credit score, you are a risk. For lenders, this risk means a huge reward. Simply put, you have to expect higher interest rates.
- Fees and penalties: you have to read the fine print at the onset so you will know about the fees and penalties. This way, you can avoid potential stress or frustration in the future.
- Collateral required: there are lenders that require collateral. With this, you need to put a house or car as collateral and in the event that you miss payments, you could potentially lose the house or car.
Where to get a loan with bad credit?
You can consider getting a bad credit loan through:
- Credit unions: this is a great option. You must know that there is a maximum allowable interest rate of 18%.
- Look for co-signer: you can get a loan if you use someone else’s high credit score. This is a viable option so you can get a lower interest rate.
- Home equity: alternatively, you can also tap home equity since a credit score is not a factor. If you have equity, you can easily qualify for a loan.
- Online or P2P: there is a huge market now of lenders offering flexible terms. However, you have to check the fees and the interest rate before you commit.