Bad credit loans are the most popular lending alternatives today because they are easy to obtain. They promise great convenience on your part that sometimes, you go directly to applying for them without really knowing what they are and what they imply. So to make understanding a part of the process of securing bad credit loans, here are some of the frequently asked questions about them.
• Why do bad credit loans have really high APRs?
APR mean the annual percentage rate. It does not apply to bad credit loans because these are only short-term loans that normally have a term of 30 days. Hence, counting the cost of the loan for a full year is both useless and impractical.
• When is the right time to use bad credit loans?
Because of their short-term nature and higher interest rates, it is best to use bad credit loans as emergency funds. You should not use these loans for not urgent and important expenditures such as shopping spree.
• How many bad credit loans can you have?
At the moment, online lenders do not yet share a central database which would help them know if you have outstanding bad credit loans from others by the time you submitted your application. So the responsibility of knowing how many bad credit loans you can handle falls on you.
Generally, you should not have more than one online loan at a time. While bad credit loans help you during an emergency need, they might make your debts worse the moment you default on them.
Also, you should not take bad credit loans with the intention of using the money to pay for other loans. If you are taking three or more bad credit loans in a year then that could be a sign of serious financial difficulties and you might need help. The best lenders can offer financial advice or you can seek help from charitable groups like the National Debt Service.
• What happens if you are paid weekly instead of monthly?
Although most bad credit loans require that you pay back the principal amount plus interest on your next payday, there are some that would agree to be repaid after four paydays. You just have to be open to your lender about your financial capabilities.
• How will the bad credit loans be repaid?
Generally, bad credit loans are repaid via automatic withdrawals (one-time or via daily installments). The automatic deduction will happen with your consent and you would normally be informed of an upcoming deduction ahead of time. But if you ask your lender, a few other options of repayment could also be presented to you. These options might include, but are not limited to, checks or debit cards.
• How much can you borrow?
Most lenders would allow you a maximum of $1500 for your first transaction. But that does not mean that you will really get the maximum because the amount of money that you will be loaned still has to depend on your salary. In both theory and practice, only 35% of your salary will be approved as loan.
But if you prove to be a good payer, your limit will likely increase in your next transactions.
It’s easy to apply for bad credit loans online as you will only be asked for a few requirements that would verify your employment status, citizenship and age. There is no credit check required so the scope of potential consumers is even expanded. Just make sure to know all the things that you need to learn about bad credit loans to experience the best deals.