Myths and misconceptions are common in every industry - and bad credit loans are no exception.
From stories about sky-high APRs to slow processing times, you may have heard some things about loans for bad credit that have you worried.
Let’s clear these up by looking at the facts.
Here are 6 myths about these loan types along with the true facts surrounding them.
Have you heard the rumor that only people with defaults on their credit report apply for loans for bad credit? It’s far from the truth.
Defaults are not the only reason for bad credit. Your credit score is calculated by taking several factors into consideration.
Some loan customers with bad credit may have defaults on their credit records - but others choose these types of loans for the benefits they offer.
The APR you pay on your bad credit loan - and the terms of the loan - vary depending on several factors.
Your credit score may not be as important a factor when it comes to approval for these loans - but your income, employment history, and collateral can make a big difference.
There is no predicting what your APR and terms will be until you apply for a loan and a lender assesses your creditworthiness.
Don’t be discouraged by myths about high interest rates - apply and see what your loan company offers you.
In the previous section we mentioned the advantage of using collateral to secure a loan with bad credit - but not every loan requires this.
You may have heard stories about people having to sign over their cars to loan providers during the application process.
For most loan applicants this isn’t something to worry about.
Don’t be too concerned if you don’t have collateral to offer as security for your loan. You can simply apply for an unsecured loan as a borrower with bad credit.
It’s true that banks offer personal loans to their clients - and clients with weaker credit are welcome to apply.
However, there are plenty of loan providers that cater to less creditworthy individuals that are not affiliated with banks.
Credit unions and online loan providers have been offering loans to individuals with weaker credit for many years.
There are several pros and cons associated with these providers as well as banks.
There may have been some truth to this myth several years (or decades) ago but today the opposite is true.
These specific loans offer some of the fastest approval times in the financial industry - in fact some of them provide instant provisional approval.
It’s not unusual to apply for a loan with weaker credit and receive your application decision - or even your cash payment -on the same day.
These loans are no more dangerous than any other type of loan.
If you budget for your monthly loan payments and ensure that you pay on time, you could improve your credit score over time.
Most loan companies catering to individuals with weaker credit maintain good relationships with their borrowers.
If your loan installment is affordable, you should have no problem making your payments.
Applying for a loan with a bad credit score is always easier if you prepare in advance.
Here are some steps you’ll want to take before you fill out your application.
The myths and misunderstandings around bad credit loans shouldn’t stop you from exploring this lending option.
Now that we’ve separated fact from fiction, you’ll be able to assess your options carefully and choose the loan that suits your needs.
A loan for borrowers with weaker credit featuring an affordable monthly payment and competitive APR could be a fast, convenient source of cash that even helps improve your credit score.
