The Internet has revolutionized the industry. With the Internet, not only have the types of loans increased, applying for one has also become easier. One sector of this industry that has been massively affected by the introduction of the Internet is the unsecured market, which is also known for offering bad credit loans.
What Are Bad Credit Loans?
As the term suggests, bad credit loans are designed for those with poor payment history. Since most traditional lending institution have strict lending standards, it is hard for someone with bad rating to secure a loan from such financial institutions.
The demand has increased in recent years with the economic downturn. Millions of Americans have lost their jobs and suffered from financial disasters, which have prompted them to secure source of funding. The bad news is that, as mentioned, traditional lenders have stiff standards when it comes to lending. If you don’t have a good score, you might find it hard to secure a loan fast from these financial institutions.
But gone are those days, as there are now plenty of lenders who offer online services to those with poor rating.
There are several types of bad credit loans. These include installment loans and payday advances. Installment loans, as the term suggests, can be paid in an installment basis over a certain period of time. In most cases, they may be paid back in six months to years, depending on the lender and the amount of money you intend to borrow. On the other hand, payday advances are paid back in a few days to a month or on your next payday, although some lenders extend the term to two months. This bad credit loans are great solutions for urgent financial needs in between paydays, while installment bad credit loans are also perfect if you want a lighter payment term per month or if you cannot pay back the money you intend to borrow on your next payday. If you intend to borrow a bigger amount of money, usually more than $1,500, installment loans are a perfect source of funds.
Bad credit loans became popular not only because of the high demand for them but also because they are easier to obtain. As long as you have a proof of active employment or income; you are a U.S. citizen; and you have an active bank account, you can pretty much obtain them from non-traditional lending institutions. No credit check is also required so even if you have a poor rating or no payment history at all, you can get approval.
However, since bad credit loans are unsecured loans, the interest rates may be higher than those imposed by traditional lenders on regular loans. This is why, bad credit loans are only perfect for temporary but small financial needs. If you intend to apply for bad credit loans to purchase unnecessary items or for not very urgent purpose, it may lead to financial disasters later on. Bad credit loans are great financial solutions if you use them for the right purpose and at the right time.