The title of this article may seem a little unorthodox- if you have bad credit, taking out loans for bad credit may seem like the last thing you should do to improve your credit score. If treated responsibly however, a bad credit personal loan can be the first step you take on the road towards credit score recovery. A personal loan differs from a payday loan in a number of ways, and while payday loans often get a bad rap for being hard to pay off, personal loans are safe, easy-to-use alternatives. Another common option for improving credit score is using a credit card for bad credit, but the risk there is running up your credit card debt and further hurting your score. There are a number of alternatives for unsecured personal loans out there, all with varying credit requirements.
A good way to check the legitimacy of a loan company is to do research online, the Better Business Bureau has resources available to help you sort the legitimate operations from the predatory ones. A personal loan for bad credit can improve your credit score in a number of ways, chiefly by improving your debt mix, or showing that you have multiple types of debt that you responsibly pay off. Another way personal loans can be used to improve your credit score is by paying off outstanding credit card debt with them. The interest rates charged by some credit card companies is much higher than the rate charged by many personal lenders. Credit repair is never easy, but personal loans for bad credit can be a viable option for improving your credit score, and we’re here to show you how.
What is a Personal Loan for Bad Credit?
A personal loan is exactly what it sounds like- money borrowed from a bank or lender that you pay back in fixed payments over differing periods of time. Personal loans are great for paying off debt because you can use the money for any reason, and approval is much easier than with a business or home loans. When a personal loan is “unsecured” like the ones we offer here at Loans Now, it means it is not backed by collateral. In other words, you don’t put up an object of value on the chance you’re unable to pay the loan off. Loans backed by collateral sometimes charge lower interest rates, but if you default, or fail to make your payments, you lose the item you put up for collateral. The interest rate you are charged on a personal loan varies with your credit score, so people with better credit typically receive better rates, but personal loans for bad credit are approved for practically any low credit score. Credit scores can range from Bad (below 600) to Excellent (750+), so make sure you get the rate that’s right for you. If you’d like to learn more, Loans Now has more resources to explore how the personal loan approval process works.
Is a Personal Loan the Right Option for my Credit Repair?
There’s no single answer to the question: “How do I improve my credit score?” Unsecured personal loans however, typically have much lower APRs than credit cards, allowing the lendee to pay off credit card debt with a personal loan, consolidating it all into one payment at a much lower interest rate. If credit card debt is the cause of your bad credit score, a personal loan is likely an excellent option to begin improving it. In addition to allowing you to consolidate debt into a single payment, personal loans have other credit repairing properties, even if you don’t currently have much credit card debt. One of the key factors in determining credit score is what is called your “debt mix.” By showing lenders and credit score companies that you are able to responsibly borrow from a variety of different sources of credit, you greatly improve your creditworthiness.
How Else do Loans for Bad Credit Improve my Credit Score?
Think about it this way, would you rather lend money to a friend who has only ever borrowed money from his best friend, or from someone who has borrowed from a number of people, always paying them back with interest? By taking out an unsecured personal loan for bad credit and responsibly repaying it, you demonstrate to creditors that you are capable of paying back multiple sources of debt, improving your rating and the likelihood of being approved for higher end loans in the future. A word of caution however, if you take out a loan and fail to meet its terms of repayment, your credit score will be lowered even further. The decision to take out a loan or open a new line of credit should never be taken lightly, even though there are those out there with less than noble intentions that make it seem like the easiest thing in the world. In addition, some loan approval processes involve a hard credit check, which can actually damage your score. Loans Now however, never gives out personal information, and we don’t run any initial credit check.
Be Careful When Taking Out Any Loans Online
When you are deciding to take out a personal loan, especially personal loans for bad credit, make sure you carefully consider your options before providing any personal information. There are a number of scam operations out there preying on people who need a loan for bad credit. Before you offer up any personal information or start the approval process, do a quick internet search to see if anyone has had a bad experience with that company. The Better Business Bureau also has resources to check the legitimacy and fairness of a company. When getting a loan online now, you have to be extra vigilant for tricks and traps. Better to do your research now than regret it later when your credit score takes another hit. Of course, the rate you get on a loan is going to depend on your credit score, so it may seem like you’re getting a raw deal from some companies at first. The road to improving your credit score can be long, but it’s worth it in the end.
What are my Other Options?
Don’t feel ready to take out an unsecured personal loan for bad credit? There are a number of other ways to repair your credit, from taking out a credit card for bad credit and using it responsibly as you would cash, to simply paying all bills on time for a long time. Sometimes credit reports are also inaccurate, so make sure you always know your credit score (but don’t obsess over it, improvement takes time and effort). You can dispute items on your credit report, but make sure you do your research and are positive you’re in the right before you try to take on a credit bureau yourself! It’s always good to start with a plan to improve your credit score and work through it a little bit at a time. It’s hard work, but your future is worth it, and it’s never too late to start. If your credit repair plan starts with an unsecured personal loan for bad credit to consolidate your credit card debt or improve your debt mix you’re in the right place- you can get loans now!