Installment loans have become part of everyday life over the last years. A couple of reasons justify their popularity. They are usually the first thing that comes mind when people have an urgent need for money or unexpected bills to pay. Bad credit usually may stand in your way if you try to resolve your financial complication through a conventional bank loan. Banks are not very inclined to take a chance on people with bad credit and they would rarely take the risk. This is where bad credit installment loans may be helpful.
What are the installment loans for bad credit?
Installment loans for bad credit or poor credit are short-term loans typically provided by financial companies and organizations (not banks). They are different from payday loans although sometimes the two could be easily confused. Bad credit installment loans are loans you repay by monthly installments, most often for a period of up to a few months or longer. If you follow your payment plan strictly, this could actually have a positive influence on your credit score.
Obtaining a bad credit installment loan is the easier way to get a fast loan. Your lender is a financial union or organization which would still consider you as a borrower regardless of your poor credit history.
A bad credit score is a red light for most banks and some financial institutions but there are ones specialized in lending money to people with bad credit. Of course, this comes with a price. Bad credit installment loans are costlier. Despite of the higher interest rates, they are often one of the few very limited financing options available to people with bad credit.
Companies for bad credit instalment loans usually require just the basic information from the borrower. Basic information such as personal, financial and employment information will help them assess whether the applicant is eligible for a loan or not.
What is bad credit?
But what is bad credit? Why is it so important to know where you stand?
Bad credit is:
- Bad credit reflects the stage of risk you represent as a debtor (borrower) for current and potential lenders
- It is a negative evaluation of your personal credit score based on several factors, such as your debt in total (credit cards, mortgages, long term loans, car loans, any debt you are in), your ability to meet payments on time, terms of delays in payment and etc.
- Bad credit is usually a serious obstacle for you to access conventional forms of financing
- Bad credit differs from no credit history – it means you already have a record of non-permeance or bad performance of liabilities
- The lower your credit score is, the higher chance there is for you to be considered having bad credit
What are the risks when borrowing bad credit installment loans?
While you are struggling to improve your score, the need of money may appear suddenly. That bad credit may allow you only to turn to bad credit installment loan. But you should be careful because a bad loan decision could wreck your finances and bring your poor score even lower.
You should be cautious of how much you should repay – sometimes the sum may grow unpleasantly and you may end up paying a lot more than expected. Bad credit installment loans companies are in the habit of offering rescheduling of pay dates, re-negotiation of loan agreements, renewals and other options that do not release you from your debt. Accepting these options may not significantly harm your credit score at first, but it may harm your income largely.
If you exercise some financial discipline and fully repay your bad credit installment loan in a timely manner (the shorter term the better), you may qualify for better loan terms the next time you borrower from the same lender.
A few tips
In summary, bad credit should be a warning not only to your future creditors, but to you as well. You should carefully consider and explore options like bad credit installment loans. You should assess whether you could actually benefit from quick repayment.
The renewals and restructuring of any loan may lead to a vicious circle of repayments. Bad credit installment loans may help you for a while but it should not be a solution to your long-term financial issues.
If your shortfall is a temporary one, you could rely on obtaining bad credit installment loan and try your best to pay it off as quickly as possible.