Having bad credit used to mean it was very difficult to be approved for a loan. However, within the last decade, there has been an increase in availability of sub-prime borrowing opportunities for many types of loans. These can include mortgages, auto, secured and personal loans. Approximately 33% of private loans are bad credit loans.
Loans for bad credit are called Sub-prime loans. The difference between Sub-Prime and Prime loans is the interest rates which are offered. People with bad credit are a higher risk for a default such as late payments or missing payments. Lenders must protect themselves from loss with borrowers who may be high risk. There are usually fees associated with bad credit loans such as obtaining the loan, higher down payment, and sometimes early payment penalties.
If a bad credit loan is utilized properly, it can be a valuable tool for repairing credit and improving finances. However, a rise in fraudulent and predatory loans taking advantage of people desperate has risen in the last few years, which can further damage people's bad credit and finances. When pursuing a loan, it is always best to take time to do plenty of research, and be sure to deal with a reputable lender.
It is possible to get a mortgage with bad credit, but usually people end up borrowing more than they can reasonably afford, which leads to foreclosure. A better course is to get a smaller house with a more inexpensive loan and work toward better credit so that a bigger loan can be sought in the future for the dream home of choice.
An auto loan with bad credit will usually have a high interest rate, which may not make it worthwhile. They may also require some sort of collateral, sometimes the car itself. Instead, it might be better to drive the current car for a while longer, or buying a used car for less money.
Debt consolidation is an option to personal bills. This can combine credit cards, bank loans, medical bills, or other types of smaller expenses. The interest rates may be high, though a single payment can make finances more manageable while repairing credit.
Cash advances, or Payday loans have less to do with credit rating, and is rather based on income. Generally these loans are for smaller amounts of money up to about $2,000. These should be avoided, and used only in extreme emergencies, as they have the highest interest rates; well over 100%!
As previously stated, a bad credit loan can be a benefit if used properly. All documentation should be read, including the "fine print". Never jump into anything, and always ask questions if something is not fully understood. Be realistic about the amount being borrowed and take into consideration the full amount of the loan, including monthly payments, interest rates, and any associated fees. Staying committed, and making payments on time and in the full amount will repair credit.
Free charting webinar
Mon, Nov 18th, 2013 12:00 PM - 1:00 PM EST
During the 60 minute session Paul Coghlan, founder of Coghlan Capital, looks at current charts for currencies, precious metals, US indices, highlighting turns and low risk entry points using the Median line analysis methodology.
Median line analysis reduces risk and increases the chartists ability to see trend direction, trend strength and highlight entry and exit levels.
Seats are limited so be sure to reserve your spot today. The webinar will be recorded, by signing up you'll receive an email with the webinar replay afterwards.