Everyone needs an emergency loan from time to time, even if they have bad credit. However, if your credit is unworthy to qualify for conventional loans, then it may take you a little time to find a loan that is right for you. Loans for people with bad credit are typically high in interest, so it is essential to only borrow what you need.
A loan can actually improve your credit score if you make the payments faithfully on time each month. If a person needs an emergency loan with bad credit, they should consider short-term loans. These loans have a low balance typically, to where a person can make the payments easily.
What Emergency Loan Might Be Right If You Have Bad Credit
The easiest type of short term emergency loan to get is a payday loan. The loan providers for these types of loans do not check a person’s score as a part of the approval process, which is why it is so easy for people who have bad credit histories to obtain these types of loans. As long as you make a certain amount of money from working or other means, then you will qualify for this loan.
The terms are usually that you will have to give the company a check that is postdated for the date that you will next get paid on. This type of loan is renewable, so you can take it out over and over again each time your loan date is due. You simply make the payment, then they will loan you the money that you made your payment with.
This type of loan can cause a person to get really behind, since the loan is actually against their paycheck and most people need their paychecks to live. This is why it is important to only borrow the minimum amount that you need and to pay it back as quickly as possible.
Title Loans are another easy loan to get if you have bad credit. These loans are typically small, because the lending institution usually takes the title to one or all of your vehicles in order to grant the loan. This means that the loan amount will only be able to be a percentage of what your vehicles are actually worth. Finance companies offer this type of loan more often than banks do, and they cater to people who have less than perfect credit.
The application process is simple, and you can usually receive a decision on your application within just a few hours. These loans are normally for a year or less in duration, but they can last longer depending on the amount of the loan and the lending institution that it is obtained from.
Emergency personal loans can often be given to people who have bad credit, but usually only through a finance company unless the person is well established with long-term standing at a regular bank. Since emergency loans are typically low amounts, regular banks are more apt to approve them with bad credit.
The loan amounts are usually so small since the amount is small, that they don’t feel that there is an overly huge risk in approving the loan. If a person pays their payments on time, then the bank or other lending institution will more than likely loan to them in the future, even if their credit is still bad.
Things to be on the Lookout for When You are getting an Emergency Bad Credit Loan
Do your research ahead of time, to find out what companies might approve you before actually applying. Each and every time you apply for a loan, it lowers your credit score a few points when the lending institution pulls your credit. If you apply to multiple companies, then it can seriously lower your score, to where companies that otherwise would have given you a loan won’t if the credit score drops to low.
Call the companies you are interested in first, to ask them what criterion they use in the loan approval process. This will let you know if you might be a good candidate for them to lend you money. Points that are deducted from your credit report for companies accessing your credit history can stay on the report for around two years, so it is important to remember this when you are applying for loans.
Another thing to keep in mind when you are applying for a bad credit loan is that finance companies on your credit report can actually lower your score a little unlike regular banks. While no one can say for sure how the credit scoring model actually works experts have determined that high risk lending companies can lower a person’s score, even if they can’t say exactly how much the scores will lower from it.