When you need money but have bad credit, your options can seem pretty limited. You often find yourself turned away by lenders who deem you too risky. Your credit card company won’t increase your spending limit. If this has happened to you, numerous times, you’re probably feeling pretty desperate by now. The good news is that bad credit signature loans might be a great option that you haven’t explored yet.
Now I know what you’re thinking – I’ve already been turned down for loans in the past; why would another loan be the solution to my problems? It’s a fair question, but bad credit loans are a different animal from the standard loans you’ve probably pursued up til now. In many cases, they’re the solution to the money problems you’re having that you’ve never thought about.
In the following, we’ll discuss seven facts about signature loans for bad credit that you may not have been aware of, and that I think will convince you that you need to start shopping for one today.
1. They Require no Collateral
By their very nature, unsecured bad credit signature loans don’t require you to give anything other than your word that you will repay the loan. A signature loan means that your promise that you will repay the loan is all a lender has to collect on. They can’t take your house, your car, your jewelry, or any other assets if you default on the loan.
Doesn’t that Make Them Hard to Qualify For?
Not in many cases. As the name suggests, bad credit loans are designed for people with no to poor credit. It means that lenders already expect that your credit won’t be great and they’re still willing to work with you. While you may not enjoy the best rates on your loan, your rates could still be better than you expect, as I’ll discuss later.
2. You Often Qualify for More Than You Think
When people hear, “bad credit loan,” they often think that they’ll be limited to a few hundred dollars. That isn’t the case at all. Depending on what your credit score and payment history are like, personal loans for bad credit can range anywhere from $500 all the way up to $70,000.
3. Interest Rates and APR Aren’t as Bad as You’ve Heard
I did mention above that your interest rate and APR will probably be higher than what you’d have with a good credit score and that’s true. Experian reported that the average APR for a person with fair to good credit was 17.31% in 2018. But with that being said, having bad credit doesn’t automatically mean that you’ll have a higher interest rate.
Because your credit score is an indicator of risk, it’s up to the lender how much interest they want to charge for taking a chance on you. For many, that does mean going up to as high as 36% APR. However, other lenders will be more comfortable lending to you and may go as low as 4.59%.
Regardless, bad credit signatures loans are still much better than payday, title, and other types of no credit check loans. They often charge an APR as high as 500%.
4. They Have the Potential to Improve Your Credit Score
Even though it may be more important to you to get money right now, a signature loan has the potential to help you increase your credit score. A better credit score will qualify you for more loans at better rates in the future. Though it won’t happen overnight, responsibly managing your loan repayments will help you establish a better credit history.
How Can a Signature Loan Improve my Score?
Your credit score is made up of five primary factors:
- Payment History – Your record of missed/late payments
- Credit Utilization – How much credit your spend versus how much you have available
- Credit History – How long you’ve had access to a line of credit
- Credit Diversity – The different types of credit you have access to, such as auto loans, student loans, credit cards, etc.
- Recent Applications for New Credit
When you’re approved for a new signature loan, you immediately improve your credit diversity. As time passes, so long as you make your monthly payments on time, you’ll also improve your payment history and credit history.
5. They Can Be Cheaper than a Credit Card
Often, people tend to put an expense on their credit card that they can’t pay in full right now, and pay it off as they go. This leads to interest charges mounting up, as well as a potentially serious blow to your credit score. Relying too much on credit cards could be the very reason why your credit isn’t very good right now.
With a signature loan, your interest rate is applied up front, and it won’t change. You don’t have to keep track of how much you’ve spent during the month – you just pay your assigned monthly minimum. This can make signature loans much easier to manage than a credit card and save you money to boot.
6. It Usually Doesn’t Take Long to Receive Your Money
One of your biggest reservations about getting a loan is that it will take too long to receive the money. It’s true that some loans can take a long time to process. Trulia reported that the average mortgage loan takes between 45 and 60 days to process.
But personal loans move much quicker. Forbes reports that the average time for a personal loan to come through is about two weeks. In some cases, you could receive your money in as little as 48 hours.
That being said, you play an active role in getting your money faster. The quicker you are about communicating with your lender, and getting them everything they need to process your loan, the faster you’ll get your money.
7. It’s Not Hard to Find a Great Lender
While there are hundreds of online and brick and mortar lenders out there, you may be thinking that it will be difficult to find a lender who is not only willing to work with you but won’t rob you blind. It is true that loan shopping can be a tall order. You have to reach out to lenders, get a quote, compare rates, and make a decision. All of that can be overwhelming, especially if you’re not familiar with the lending world.
But don’t get discouraged. There are resources available that allow you to compare multiple signature loan options in one sitting.
How to Make Finding a Great Lender Easier
Loans Now’s mission is to allow you to find a great bad credit loan. With just a small amount of basic information, we can provide you with several different lending options to choose from. While we do require your credit score, we don’t pull it ourselves. We provide the tools to check your score and then tell us what it is.
Best of all, it’s completely free. Loans Now will never ask you for money. We don’t lend anything ourselves – we’re here to find you some great options that you can use to get the money you need now!