Bad credit borrowers face the worse possible difficulties when it comes to borrowing money for even the smallest of needs. With bad credit, lenders see you as a probable liability that they do not wish to take a chance on. However, there are lenders who see the potential in loaning money to those with less than stellar credit reports and derogatory credit files. More and more lenders are moving towards financing loans for those with bad credit because it can be profitable (they charge you an inflated interest rate) and they oftentimes end up with lifelong customers who successfully complete all loan terms and come back to borrow again when they have a future need.
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Interest Rates on Bad Credit Loans
Your bad credit loan, as mentioned above, will cost more for you over the long run than borrowing the same amount of money would if another borrower with great credit took out the loan. This is to be expected, so be prepared for "sticker shock" when it comes to signing your loan papers. Many bad credit lenders will charge around 18% on these types of loans. But you must consider this extra amount of money that the loan will cost you as an investment in improving your credit (FICO) score and building up a good borrowing reputation with the lender. Your interest rate may be less or more, depending upon your individual circumstances.
Purposes for Bad Credit Loans
There are many reasons that you may need to take out a bad credit loan. Perhaps you are looking to do minor or major repairs to your home, purchase new furniture (or new kitchen or laundry appliances), add a room, put in a pool, or even take a vacation or pay for a wedding. Whatever need you have, the bad credit loan is available.
Qualifying for Bad Credit Loans
Bad credit loans can be either secured or unsecured. If you are a homeowner, you can allow the lender to place a lien on your home to secure your bad credit loan; this type of loan is a bad credit secured loan. If you do not own your home, you can allow the lender to place a lien on your vehicle. If you have no collateral or are unwilling to risk your collateral, you need a signature bad credit loan. This type of loan is guaranteed only by your signature.
Signature bad credit loans may require that you obtain a cosigner who has good credit to sign alongside you and agree to pay the loan payments if you fail to do so. Your cosigner can be anyone that trusts you to repay the money you have borrowed. For very small (less than $5,000) signature bad credit loans, the lender may not require a cosigner. Examples of good candidates for cosigners are parents, other relatives, or even friends.
Online Bad Credit Loans
Getting your loan online may be the most expedient way to receive funding. When applying online, you have the advantage of a paperless application that takes just minutes to fill out and an instant decision once you have completed all of the necessary documentation for your bad credit loan.