Loans for Bad Credit: A Shopping List

Here are four terms you need to know to find the loan that works best for you.

If you’ve got bad credit, you’re probably used to hearing people say “no.” Can I rent this apartment? “No.” Can I get a mortgage to buy that house? “No.” Can I have this job that I am super-duper qualified for? “Surprisingly, due to your bad credit…No.”

But as common as it is for people with bad credit to hear the word “no”, they also have to be cautious whenever they hear the word “yes.” There are many lenders out there who take advantage of people with poor credit. They know that these people lack options, which means that these lenders can charge them eye-gougingly high interest rates and demand that the loan be repaid in full within the blink of a (recently gouged) eye.

People shouldn’t have to resort to payday loans or car title loans just to make ends meet. We want to make sure our customers know what to look for when shopping for a personal loan. So here are some things to keep in mind when clicking on ads that say “Fast cash!” or “No credit, no problem” or “this is not a scam!” (Spoiler: it’s a scam.)

1. APR

You’ve likely seen this acronym before. It’s standard for loans of any kind. What it stands for is “Annual Percentage Rate” and it includes not only the interest rate for the loan but also any fees that will be charged. Think of it this way: The interest rate only describes the interest charged on a loan. APR, though, communicates full cost of the loan (interest plus fees) over the course of a full calendar year.1

Always look for the APR rather than the interest rate, because the APR is more indicative of how much you’ll actually pay. A loan with 15 percent interest may sound good, but when it comes with an additional $5 fee and a 14-day term, that adds up to an APR of 520%. To call that number “a bit high” would be like calling the Grand Canyon “a bit deep.”

2. Length of Term

Simply put, this is how long you have until the loan is due to be repaid. For installment loans, it’s a set amount of time while, with a revolving line of credit like a credit card, it’s relative to how much you’ve spent. The length of the term is important to know because, in combination with the APR, it helps determine how much your loan payments will be each month. With many payday or title loans, you’ll often see payment terms from two weeks to two months. Watch out for loans with terms like these because you do not have a lot of time to pay them back in full. And failure to do so could lead to additional penalties or even a court date.

Personal installment loans from OppLoans come with terms between 6 and 36 months.

3. Fixed vs Variable Rates

When you sign up for a loan that has a 30% APR, you expect to get exactly that: a loan with a 30% APR. But if a loan has a variable rate, the APR could change. And when it does, you can rest assured that it won’t be going down. It could go up to 40%. Or 50%. Or even 60%! With a fixed rate, the APR on a loan will not change. You will probably need to scour the fine print to find out whether a loan’s APR is fixed or variable.

The rates for a personal installment loan from OppLoans are fixed, meaning your low monthly payment will never change.

4. Fees

Almost any loan comes with fees. Two of the most common kinds of fees are origination fees and prepayment penalties. Origination fees are charged when the loan is first issued and are deducted from the principal, while prepayment penalties are charged if the borrower pays the loan off early. Basically with a prepayment penalty, what they are penalizing is financial responsibility. Always make sure to talk to your loan officer and read the fine print to find out what kinds of fees are attached to your loan.

A personal installment loan from OppLoans has no application or origination fees. We also don’t charge prepayment penalties, so you won’t be penalized for paying your loan off early.

There are a lot of loans out there, even for people with bad or slightly less-than-average credit. Many of them are very dangerous…. Looking at you, bad credit loans and “no credit check loans.” (Any lender who doesn’t care at all about your credit is likely trying to trap you in a predatory debt trap.) Make sure your lender performs a soft credit check, ensures you’re employed, and actually wants you to be able to afford your loan.

But don’t worry! If you do your homework, you’ll be able to find a loan that works for you.

To learn more about the ins and outs of borrowing safely and avoiding predatory lenders, check out the OppLoans ebook “How to Protect Yourself from Payday Loans and Predatory Lenders.”

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Works Cited:

1 “Annual Percentage Rate – APR” Investopedia.com http://www.investopedia.com/terms/a/apr.asp. Accessed September 11, 2017.