Effective Ways Of Getting Short-Term Loans WIth Bad Credit
When you need cash in a hurry, there’s often no time to wait for loans with lengthy application processes. Short-term loans are an excellent alternative for borrowers who are prepared to repay the outstanding amount within a year or less.
In this article, we’ll go over the basics regarding the different short-term loans for bad credit borrowers. Furthermore, we’ll share some strategies that you can use to secure this type of financing.
How Short-Term Lending Works
Unlike long-term lending products that can take decades to repay, short-term loans are usually settled within 12 months or less.
- Lending products with short tenures are ideal for financing smaller purchases or emergency expenses that happen to arise at a time when your budget is limited. Lenders will expect you to pay down the outstanding amount in a matter of months or a year
- It’s important to note that loans with a shorter repayment time tend to come with high monthly payments. This is because the amount you need to repay will be divided by fewer months than it would be with a longer-term loan
Can I Get A Short-Term Loan With Bad Credit?
Many short-term lenders cater specifically to the needs of customers with poor credit. Instead of looking at your rating, these finance companies will assess your application based on other affordability factors. These may include:
- Your monthly income
- Your job situation
- An assessment of your monthly income and expenses
If you’re worried about your chances of being approved for a bad credit loan, there are several steps you can take to improve them.
Short-Term Loan Hints For Success
Before you apply for a short-term loan, you’ll want to follow the tips listed low to help increase your chances of a successful application.
Know Your FICO Numbers
Your credit score is a number between 300 and 850 that gives prospective lenders a clue as to how creditworthy you are.
- If you don’t know your rating, find out what it is by requesting your free annual report
- You’ll want to keep your FICO score as high as possible. Do this by paying your accounts on time and keeping your credit balances below 30% of your total available balance
Only Borrow As Much As You Need
When you’re shopping around for lending products, you may notice that different lenders offer various minimum and maximum loan amounts. While it’s tempting to select the maximum amount that you qualify for, this may not be a good idea when it comes to your monthly payments.
- As mentioned above, short-term loans often come with higher monthly payments for the same loan amount. If you borrow a large amount this could translate into even more expensive monthly payments and you may find yourself unable to meet these obligations
- Late payments and defaults can cause your score to drop substantially. That’s why it’s important to only borrow as much as you need and pay down the outstanding amount as soon as possible without missing any payments
What Happens If You Default?
Paying your loan on time is an important strategy that can help boost your FICO score. However, late payments can have the opposite effect.
- If you don’t pay your installment loan on time, you’ll probably receive a payment reminder from your lending institution. Additionally, the lender may call you to find out when your account will be restored to good standing
- It’s important to settle any outstanding amount you owe at this early stage. Therefore, don’t avoid your lender or let multiple payments lapse. Most lending institutions will report your account as being in default after three to six months of no payments. At this stage, you’ll have negative marks on your report and your rating could suffer as a result
- A low rating can prevent you from qualifying for loans, mortgages, and credit cards. Additionally, it can result in you having to pay a higher APR on future credit
Where To Get A Bad Credit Short-Term Loan
Most loans with a repayment period of a year or less fall into the unsecured personal lending category. With numerous loan providers operating in this market, it can sometimes be difficult to decide which company to apply to. Here are some of the lenders you’ll want to consider:
- NetCredit. This lending provider offers a range of loan options with repayment periods starting from six months. Bad credit customers are welcome to apply and applications typically take between one and three days to process
- Avant. The lending products available from this company are repayable over two years or more. This could give you the benefit of paying down your debt over a relatively short period while keeping your installments lower than they would be with a typical short-term financing option
The Bottom Line
Short-term lending comes with a variety of benefits that makes it ideal for financing unexpected expenses.
Before you apply, you’ll want to ensure that you’re able to afford your monthly payments and that the loan company you select offers competitive APRs and is bad credit-friendly.