If you have bad credit, you know that loans can be difficult. In most cases, it means turning to a payday loan lender. This can be a problem because of the short terms of payday loans and, of course, because of the high fees. Let’s take a look at some possible loan choices that you can consider if you need emergency ash and have a bad credit score.
Payday loans are usually the easiest loans to qualify for. If you have a source of income, a checking account and a form of government identification, you should be in good shape. Here are some of the good and bad things about the payday loan.
- Easy to qualify for.
- Fast loan disbursement.
- Easy applications.
- High loan fees.
- Short loan terms of 10 to 14 days.
- Limited dollar amounts.
Installment or personal loans are an option that is available to you, despite having bad credit. if you live in Texas, we can help you get one of these loans, even with bad credit. Whether you live in Lewisville or Galveston, we can get you a quote.
They are a bit harder to qualify for than your standard payday loan but they have a number of benefits. Here are some basic things you should know about an install loan.
- Easy to qualify for
- Available in higher dollar amounts.
- Longer loan terms
- High interest rates and possible loan fees.
- May require automatic withdrawals.
If you have a free and clear title to a vehicle, a title loan is a possibility. This is a secured loan so it is easier to get than other loans, even with bad credit. Being a secured loan also puts you at risk of losing your vehicle. If you default, they will come and get it. Here are some things to consider.
- You get the money fast.
- Easy qualifying because the loan is secure.
- You could lose your vehicle.
- High fees and interest.
This is also a secured loan but it involves leaving your property with the lender, in this case the pawn shop. You place an item in hock and when the loan is due, you pay it back and get your item back. Here are some pluses and minuses of a pawn loan.
- Funds the same day.
- Automatic qualification with property.
- Low loan amounts.
- You lose immediate use of your item.
The Cost Of Bad Credit
As you can see, there are a lot of ways to score a loan, even if you have bad credit. This does not necessarily mean that you should take them though, at least not if you have other options. This is because bad credit loans come at a great cost.
The biggest cost is the APR. An Annual Percentage Rate is the effective interest rate that you pay, taking into account all fees and loan costs. Payday loans will have the biggest APR because of the short loan term. The fee might be $20 per $100 borrowed but because of the short term, the APR could be well over 600 percent, Ouch.
All other bad credit loans will also have high APR and you need to consider this before accepting one. If you can do without the loan, it is probably best to do so. Having said that, we realize that sometimes you have to do what you have to do to handle an emergency.
Improving Your Credit
Take out one bad loan and you will quickly see the value in good credit. You might think that credit is confusing and that your score is hopeless but you would be wrong on both counts. It is actually quite easy to understand the system and to get a good score. Here is what you need to do.
Get Your Cards Paid Off
If you have credit cards that are all charged up, this is your biggest problem. You need to get your credit balances under 30 percent for a good score improvement and under 10 percent for the best improvement.
Your amount of available credit represents 35 percent of your score, so this is a big deal.
So, what if you have no credit cards and can not qualify? Get a secured card. For around $500, you can get a secured card and start building your credit. The money is not lost, it is just held for security.
Pay Your Bills On Time
This is almost a third of your score. When you pay a bill late, your creditors will place a 30, 60 or even 90 day late mark on your report. This will drag your score down to the basement.
If you have late pays on your report, do not give up hope. In as little as 6 months, you can start seeing the benefits of on time bill payment. If you find this difficult, you may need to try to cut some expenses or simply use automatic bill pay.
As For The Rest
The above two things represent about 65 percent of your score, so concentrate on them. Besides these two things there are other factors that will be a bit harder to work on until your credit profile improves. These factors are the length of your credit history, the diversity of your credit accounts and the amount of new inquiries on your report.
Keep the inquiries down and the rest will work itself out as your credit profile ages.