Your Authoritative Guide to Online Bad Credit Loans
OppLoans is committed to providing the highest quality bad credit loan information possible. If you have bad credit, there is hope. Take advantage of the many resources out there, speak with experts and make the right decisions for the financial health of yourself and your family. Read on to learn more about the world of Bad Credit Loans and how it may impact you.
Here are the cold hard facts:
This doesn’t paint a very rosy financial picture. The truth is that most of us live on the razor’s edge of financial disaster.
We might seem like we’re doing well — maybe the rent is paid, the kids are fed, and you’ve got enough gas in your car to get to work. But if you’re like most Americans, chances are you’re not saving enough money… Which means when a financial emergency strikes, you could find yourself in a tight spot.
The most common financial emergencies are:
|Most Common Emergency Expenses||Percentages|
|Major household repairs||26.4%|
|Cost of living increases||16.5%|
If you find yourself in one of these emergency situations, you’ll likely need to dip into your emergency fund to fix that transmission, repair that roof, or whatever the case may be. You do have an emergency fund of six months’ worth of living expenses saved up, right?
Chances are, you don’t. And neither do 55 million other Americans.
In that unfortunate scenario, you may need to borrow money. There are many ways to take out loans and many ways to borrow. Some traditional ways of borrowing money include:
As with every financial decision, you’ll want to be very careful and make the right choice for you before you sign up to owe money to a bank, credit card company, or family member.
Every day, average Americans borrow money. Here are the facts about personal loans in America today.
Number of Americans Borrowing Personal Loans:
|Year||Number of Personal Loans Accounts (in Millions)||Percentage of Americans with a Personal Loan|
Snapshot of National Personal Loan Info as of Q4 2018:
|Average Personal Loan Balance||$15,143|
|Average Monthly Payment||$353|
|Number of Outstanding Personal Loan Accounts||36.8 million|
|New Personal Loan Accounts||6.1 million|
|Number of Consumers with a Personal Loan||34.3 million|
|Existing Personal Loan Debt||$291 billion|
Now, let’s say you’ve decided to borrow money to fund that emergency expense. You go to the bank or call up that rich uncle —but it doesn’t go the way you expect. Your uncle can’t or won’t help, and the bank has decided it’s too risky to lend you money due to your “bad credit.”
What does this mean? And what are you going to do about your financial emergency? You need money now, after all. But your bad credit is holding you back.
Let’s get to the bottom of this “bad credit” mystery.
What Does Bad Credit Mean?
More than half of Americans have “bad credit.”
If you’ve ever used a credit card or borrowed money, then you likely have a history of using credit. This credit history is like a record of your credit usage, debts incurred and paid (or not paid), and other data that describes how well (or poorly) you use credit.
All of this information is collected by the three different credit bureaus and compiled into something called your credit report. Your credit report is a detailed document that itemizes any debts you’ve failed to pay (such as any previous personal loans you may defaulted on). You can get a copy of your credit report here.
Your credit report will then inform a number called your Credit Score. Think of this like a grade that reflects how well you use your credit and how reliably you pay your debts.
Don’t worry. In simplest terms, the number you’ll need to understand about your own creditworthiness is your credit score. You can learn how to access your credit score here.
Once you know your credit score, compare it to this table to learn how good (or bad) your credit ranks is.
|FICO Score Ranges and Corresponding Credit Ratings according to Experian.|
|740-799||Very Good Credit|
|300-579||Very Poor Credit|
If your score is less than “Good“, don’t panic. You’ve already taken the most important first step of learning what your credit score is. Improving your credit score can be done; i. It will take time and dedication,; but it can be done.
Are you thinking: That sounds hard. Why should I want to improve my credit in the first place?
Good question. Let’s look at…
How Can Bad Credit Impact Your Life?
What’s important to you? Providing a stable life for yourself and your family? Improving your quality of life? Being able to afford the things you want?
If those are concepts you value, then credit is probably important to you too.
If you have good credit, you’ll want to maintain it. If you have bad credit, you’ll want to improve it. Why? Because bad credit can have a major impact on many aspects of your life and it can hold you back in the following ways:
- Bad Credit can make it more difficult to get approved for various types of loans including car loans, mortgages, personal loans and more.
- The loans you are approved for will likely come at a much higher interest rates than loans offered to those with higher credit scores.
- Potential landlords will likely check your credit. A bad credit score can make it difficult to get approved to rent. The more desirable the apartment, the more important your credit score is. If you’re competing with other prospective renters for a property, the potential tenants with the best credit will be the most attractive to the landlord. Will it be you?
- Bad credit could also hinder your ability to get certain jobs. Have you heard that prospective employers can run credit checks on you as part of the job interview process? It’s true.
- If the position you’re applying for is in upper management or requires handling of cash, then your credit score could be used to determine if you’re the right candidate for the role. A potential employer must inform you if they’re going to check your credit.
From what you can purchase, to where you live, to certain employment options, and more, credit is an essential element of modern life.
Okay, so you have “Bad Credit”, and you want to improve it, but you still need money now.
So what options are available?
What are Bad Credit Loans?
If you need to borrow money, then what you need is someone like a bank, credit union, family member or other body, to lend you the money.
If you’re the borrower, you’ll receive an amount of money, called the principal. This is money that you can use now, but will have to pay back later.
Depending on the type of loan you borrow, that loan may:
Now, most loans aren’t free. You need to pay for the privilege of using someone else’s money now. The cost that you’re charged for using someone else’s money is called interest.
Typically, a lender determines how much interest to charge a borrower based on their creditworthiness. This is how a creditor grades a borrower’s risk profile, or how likely it is that the borrower will repay the loan that he or she has borrowed.
The riskier the borrower is perceived to be, the more interest the lender will likely charge. The less risky a borrower is perceived to be, the less he or she can expect to be charged. (It pays to have good credit!)
So back to you…
If you have bad credit, and need a loan, then it’s less likely you’ll be approved by most lenders. The lenders that will provide you a loan will want to charge you more interest to de-risk themselves for the cost of providing you that loan.
A bad credit loan, then, is a loan that’s offered to a borrower with bad credit. The hallmarks of a bad credit loan are typically:
- Higher interest
- Shorter Terms
- Very often they are secured by a piece of collateral, such as a car in the case of a title loan. Which are often considered predatory.
A bad credit loan is a type of personal loan offered to borrowers with weak, bad, or no credit. There are many different loans and many different types of financial institutions that offer them—banks, credit unions, and online lenders, among others.
One characteristic of bad credit loans is that they will generally be expensive. This is because lenders charge higher interest rates to borrowers with bad credit than they do to borrowers with good credit.
So what is a good credit score and what is a bad one? Generally, a FICO score below 580 is considered bad. If you don’t know your credit score, you may be able to access it through your online bank account or credit card statement.
Who has Bad Credit?
When you learn that you have bad credit, it can be a scary feeling. You might feel like you did something wrong. You might feel like you’re alone.
But are you alone? Not at all. Check out these numbers:
|FICO Score Range||Percentage of US Consumers|
Source: The Ascent from The Motley Fool
How do Bad Credit Loans work?
At this point, you may be thinking: Wait a minute! I have bad credit AND I’m broke. And because of that, a lender wants to charge me more interest?
Well the answer, sadly, is yes. Lenders are probably going to charge you more interest.
When you have bad credit, it means you might have a history of paying your debts late or not at all. (You can read more about credit scores and what they mean in our guide to understand your credit score eBook.) This makes it riskier for lenders to let you borrow money. From their perspective, you already have a history of not paying your debts, so why should they expect it to be any different with them? If they lend you a thousand dollars, there’s a very real risk that they’re not going to be repaid.
To compensate themselves for that risk, lenders charge higher interest rates (the cost of borrowing money) to borrowers with bad credit.
Are Bad Credit Loans Safe?
If you have bad credit and need a loan, there is good news and bad news.
First the good news, you can get many loan offers.
The bad: Some of the loans offered can be predatory. Predatory in this instance is a loan that doesn’t really look at the consumer’s ability to repay, offers higher loan amounts than a consumer can likely repay in a short term, and provides very short repayment windows. This can trap a borrower in a cycle of debt.
A bad credit loan may sound like a good idea (You get cash now to deal with your financial emergency. Great, right?) but hold on. Remember what we just covered: Typically bad credit loans are more expensive than normal loans and, depending on the lender and type of loan, they can even be predatory, as we talked about above.
You should always be careful when considering borrowing.
Not all Bad Credit Loans are dangerous. There are many bad credit loans offered by certain banks, credit unions and lending circles that take into consideration a consumer’s needs, income and repayment preferences.
How to Tell if a Lender is Legit
When evaluating potential lenders, here are some of the actions you can take before you start an application:
- Check Google reviews
- Check the BBB rating
- Check payment requirements. (Are advanced payment of a loan required? If so, you’re probably looking at a scam.)
If you have concerns about the business practices of a lender you’re already doing business with, contact your state’s regulatory agency.
Can Bad Credit Loans improve your credit?
As with all loans, this question has many answers (and many caveats). There are cases in which a bad credit loan can help build your credit history. But in order to make this happen, it’s critical that you select a loan that:
- You can afford
- Is from a lender that reports repayment to the credit bureaus.
If you borrow a bad credit loan from a lender that reports your payments to the credit bureaus and you successfully make your payments on time, then that can have a positive impact on your credit report.
The Bottom Line
Bad Credit can hold you back in life—especially if you have a financial emergency. But there are ways get the money you need now. A bad credit loan from a reputable lender is one option you may consider.
Always do your research first and make sure you understand the terms and conditions of any contract you sign.
With diligence, you can overcome bad credit.