Suffering from Bad Credit? Bad Credit Loans & Financing Help
High-interest loans are often looked upon with suspicion, and companies specializing in bad credit loans are seen as sharks. Many feel these companies take advantage of individuals in a bad credit situation, exploiting consumer needs to charge exorbitant interest rates. Although there are always unethical people swimming the loan waters, there are plenty of legitimate companies offering loans to those with bad credit.
What Are Bad Credit Loans?
If your credit score is below fair, you likely will not qualify for traditional financing for a mortgage, automobile or other expensive purchase. This does not mean you cannot obtain financing. Some companies offer sub-prime loans to individuals with poor credit. The loans usually come with interest rates that are much higher than normal. For example, interest rates on an automobile loan could average between zero and five percent for qualified buyers. Rates for those with bad credit would be ten percent or higher.
Benefits of Bad Credit Loans
The major benefit of this type of loan is that you can obtain it. There may be times with there is no other option. Although most personal finance gurus advise against such loans and advocate for saving up to pay cash for large purchases, you may not be in a situation to do so. It is possible you have been out of work and do not have a car. You are offered a great job that can help fix your situation, but you have to have a car to get to work. This might be a time with a high-interest loan would be worth it.
Bad credit loans can also help rebuild your credit. By paying on time each month, you will be building a positive history. Such payments will not remove negative items on your report, but can go a long way in mitigating damage.
When to Use Bad Credit Loans
If you have bad credit, you should not attempt to finance things through high-interest loans that are non-essential. Financing a new sofa, television or even an unnecessary automobile through such a loan does nothing to improve your financial situation. The only time you should use such a loan option is if it is necessary and you have no other payment options available.
If you do find yourself in a situation where bad credit financing is unavoidable, you should try to mitigate the interest costs by paying the loan off early. Read the fine print in your loan paperwork, because some arrangements will not allow you to pay extra on the principle. If the loan is structured to allow additional principle payments each month, you can save hundreds in long-term interest by paying only $20 extra each month.