When requesting a loan, there are many factors that you must take into account. And one of the most important will always be which lender you are going to work with. This decision will always depend on the expectations of your loan and your possibilities. Like for example, your credit score. If you have bad credit, the loans that you can access will be very different from those that you could obtain having a good credit history and you will have to incur to a bad credit lenders.
If your case is the first, that is, you have bad credit but you still need a loan, your best option will be to qualify for the so-called bad credit lenders or a bad credit direct lender.
Understandably, you feel a little mistrust, because in this world of finance you can find many frauds and people who take advantage of the economic needs of others. So discover here how to choose a reliable bad credit lender.
A bad credit lender is a lender just like any other. Only this is tailored to the needs of people who do not have a good credit score. This may include, for example, higher interest rates, smaller loans, different origination fees, or different requirements than a regular loan.
It is very common to see direct lenders in these cases because usually banks and large financial institutions avoid working with high-risk people, that is, those who have bad credit reports.
Personal loans are financial instruments in which a person (the lender) makes a loan for a certain amount of money to another person (the debtor) in which the debtor agrees to pay back the original amount in addition to interest, and other costs associated with the loan in the time or term defined according to the terms established for said loan.
Also, remember to be careful with unsecured personal loans.
Bad credit loans
Essentially, a bad credit loan it’s the same as a personal loan. But these are special to consumers with a poor credit score or with no credit history at all, but as we said earlier, these loans tend to be more expensive after all.
Because you are not going to borrow so much money, but you may pay a very high-interest rate compared to other common loans.
We have talked a lot about interest rates and how much it varies depending on if you apply for a common personal loan or if you need a bad credit loan. So let’s take a closer look at what we’re talking about:
What is the annual interest or APR?
Annual interest or APR is the sum of the interest plus extra charges, calculated on an annual basis translated into a percentage.
The annual interest depends on when the amount is borrowed, the duration of the loan, and the extra payments or charges.
What defines your annual interest or APR?
As we told before, the better credit record you have, the lower interest you will receive on personal loans. Your credit record depends on whether you have paid your bills on time and how many other debts you have compared to what you earn monthly.
Read the following list to get an idea of the annual interest or APRs that you can get according to your credit score:
- Excellent Credit Score (From 670 onwards): Annual interest starting at 4.99%.
- Good Credit Score (From 620 onwards): Annual interest starting at 15.99%.
- Regular Credit Score or Fair Credit (From 580 to 620): Annual interest starting at 35.99%.
- Minimum Credit Score (Less than 580): Annual interest starting at 59.99%.
As large banks and financial institutions do not usually grant loans to personnel who do not have a good credit history, your best option is possible to get a direct lender specialized in bad credit online or small financing companies.
There are many options, you just have to know how to look and be very careful. In these cases, you must make sure that your lender is legitimate to avoid falling for scams. Ask for recommendations, consult with people who know the subject or have already worked with a bad credit lender before.
Even so, it is not easy to detect when a lender is not to be trusted. So we will give you some red flags that you can keep an eye out for when looking for one.
Bad credit lenders red flags
Here are some red flags to look out for when going after loans.
- No Credit Check or Guaranteed Approval: Reputable lenders research your finances, including your credit, income, and funds, to determine if you can repay the loan. A lender that fails to do this can charge exorbitant fees that could lead to a debt trap.
- No state license: Lenders are required by the Federal Trade Commission to register in the states where they operate. Many lenders list state licenses on their websites.
- Apply for a gift card: No legitimate lender requests a gift card in exchange for a loan. If you are asked to provide a gift card, even if someone says they work for a popular lender, consider it a scam.
No Fee Disclosures: The Truth in Lending Act requires lenders to disclose the loan’s APR, total interest, and total repayment amount before signing a loan agreement. You should be able to see this information before signing.
Bad credit lenders are reliable as long as you do your homework and do research to find trustable companies that are able to lend you money. On the contrary, you may be dealing with a scam and that may drive you to an endless cycle of debt.
Beware that you won’t find bad credit lenders on Google, since they don’t call themselves like that. Have in mind these tips that Flash Financial Guides gives you to find reliable credit organizations and you will be able to find great deals for you.