A bad credit personal loan is fairly easy to get, although the high interest rate on this type of loan is its main drawback. However, if you do need a lump sum of money quickly and have no other options, it can be a realistic short term or long term answer to your financial problems.
These loans are available in two basic types - secured and unsecured. A secured loan requires that you use your car or home as collateral; in the event of you defaulting on the loan, your car can then be taken from you, or your home can be foreclosed upon. On the other hand, an unsecured loan does not require collateral, and for this reason it is a safer option, although it is almost certainly going to have a higher interest rate than a secured loan.
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Undoubtedly, the biggest disadvantage with a bad credit personal loan is that they are going to come with a much higher interest rate than other types of loans. The interest rate that a borrower is charged is based largely on what a lender determines their risk factor to be - in other words, how likely it is that the loan will be paid back on time. A borrower who has bad credit for whatever reason is clearly a high risk and because of this, the interest rate will be higher.
There are advantages to these loans. It is easy to find lenders and compare rates and other features - often without leaving home. The internet has made it quick and easy to research online, even apply and be approved. Often, the money is available to you that same day and the requirements for the loan application are minimal. Of course, there is no credit check. The schedule to repay the loan can also be extremely flexible - often up to a few years.
Another big advantage is that the money can be used for anything you like. There are no restrictions and the lender does not need to know your intentions. Many borrowers use the money for college, medical expenses or simply to pay off another loan or their credit cards. Some people simply need the money to see them through to payday. In general, it is a better strategy to have one loan that you are paying on rather than several different loans.
A bad credit personal loan can be a quick fix if you need money in a hurry. However, it does come with a high interest rate; and you may find that you have better options, such as a line of credit on your home. Always shop around and compare rates. Even a slight variation in interest rates can potentially save hundreds of dollars.
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