Bad Credit loan benefits
A bad credit loan is a financial fix for borrowers with a poor credit history who require much-needed funds. An individual with a poor credit score can find these personal loans helpful even after higher interest rates as they can fulfill their financial needs of the hour.
An individual can utilize bad credit loans under the following circumstances:
- Default on previous loan payments.
- Default on credit card bills.
- If an individual has no financial track record.
- If a loan application has been rejected previously due to a bad credit score.
Credit Score Categories
There is no officially stated “bad credit score” category, and the definition of a score may vary by lender. Most institutions consider an application with a score of 650 risky and thus provide personal loans at higher interest rates.
The credit score lies between 300-850 and is generally categorized as follows:
- 760-850 – Excellent
- 700-759 – Good
- 660-699 – Fair
- 620-659 – Poor
- Scores less than 620 – Very poor
Benefits of Bad Credit Loans in 2021
- Fast Loans
You can make an online application, and within a few hours, you will get a response on loan approval. Many lenders can credit funds in your account within a day.
- Lower Interest Rate than Credit Cards
If your bad credit loan application is accepted, you can save much as it carries a lower interest rate than your credit card.
- Consolidation of Outstanding Debt
Consolidation means payment of all small debts using owed capital from one lender. This way, you can reduce the median interest rate.
- Flexible Repayment Tenor
Depending on the choice of lender, repayment tenor could be from 1-to-5 years.
- Unrestricted to fund utilization
As bad credit loans are personal loans, their credit can be used for any purpose, anything other than illegal, as per your requirement. Utilize it for credit card debt payment, home improvements, medical bills payments, debt consolidation, or high-value purchases, own a new car, or any other major home repair. Just utilize funds as per your requirements. It is your choice how you want to spend these funds.
- Improved Credit Score: If you repay this approved loan in a disciplined manner by making timely payments, you will find your credit score improved, and you will be able to get a loan at concessional interest rates.
Prove Your Creditworthiness
You can prove your creditworthiness to the lender by providing the following details that will help you to reduce bad credit loan interest rates:
- Tax returns: W-2s and 1099 forms for a minimum of two last years
- Each detail of your work history, salary, and pay remainders
- Your asset details like home, car, property
- Details of unsecured debts, like credit cards, student loans
- If you give or get alimony
- Bank statements and details of CDs or investments, if any
Keep in mind that the higher interest rate is part of the process. If you do not need urgent finance, you can first improve your credit score by paying all bills and EMIs on time and then can apply for an affordable loan. Otherwise, a bad credit loan is one of the best options to save yourself from a financially stressed situation.