A Financial Life Raft: How to Get Second Chance Personal Loans with Bad Credit
Mar 05, 2019 03:06
How to Get Second Chance Personal Loans with Bad Credit
Are you in desperate need of a financial life raft to get you out of trouble? Learn how to get second chance personal loans with bad credit here.
Can’t get a loan because of a bad credit score? Uncertain if you’ll qualify for your next application?
One may get a bad credit score for a variety of reasons; you may have failed to pay off a loan on-time, for example, or it could be something that wasn’t even your mistake, like identity fraud.
Whichever the reason is, you now have fewer chances of getting a loan from banks and other institutions.
However, that doesn’t mean you can’t get a loan whenever you need one. There are second chance personal loans with bad credit that can help you get back on your feet.
What are second chance loans and how can they help you with your credit score? Keep on reading to find out and see if you can qualify.
What are Second Chance Personal Loans with Bad Credit?
A second chance loan is a type of low credit score loans. It's intended for those with poor credit who won’t likely be able to qualify for traditional loans. It’s usually for short-term financing, but it may also have a term-to-maturity.
The reason behind its name is that it can be a way to repair your credit history. By making payments for a loan on time, borrowers will start to have a good history of responsible borrowing.
There’s also another type of second chance loans, called payday loans. Here, a borrower has to pay the full amount of the loan plus interest in a couple of weeks or so.
The end of the term coincides with the borrower’s payday, hence the name. The amount is usually smaller, making it possible to pay at the end of the short term.
Once the borrower has built a better credit history, they will then be able to apply for loans with better terms. They may also refinance to a loan with more favorable rates.
What are the Requirements?
Loans for people with bad credit usually have some pretty basic requirements, like:
•18 years old or older
•A legal U.S. citizen
•Have a job and a verifiable income
•Have a bank account
Some lenders may have more requirements, but the credit score usually doesn’t matter. As long as they can verify that you have the capacity to pay for the loan through your income, many institutions will approve your application.
Note, however, that qualifying for the basics above doesn’t guarantee approval. Lenders still have to review each case and then decide.
After which, they will decide on the terms and the rates of your loan. This means that you may get different offers from different institutions.
Risks to Consider When Taking out Second Chance Payday Loans
One thing you need to know about second chance loans is that the interest rates are usually higher. This is because lenders assume more risks in loaning money to borrowers who have a bad history of making on-time payments.
A payday loan, for example, can have an APR of almost 400%. What’s more, if you miss a payment, the interest rates will soar higher.
It might even arrive at a point that you will not be able to afford it anymore. There’s also the risk of you losing your income and experiencing other financial setbacks in the midst of paying off your loan.
Why You Should Get a Second Chance Loan?
Although getting a second chance loan may seem risky, the interest rates are not that exorbitant, contrary to popular belief. Lenders still comply with federal and state regulations. This will protect consumers from predatory terms and rates.
As long as you pay on time, you won’t have to pay for other fees that might drive up your payments. Some second chance loans also have fixed interest rates for the first 3 years. This makes for comfortable and predictable monthly payments.
Who Should Apply?
Before you apply for loans for bad credit online, first check if you’re not qualified for traditional loans. These can be less expensive and less risky — but only if you have a good enough credit score. If you’ve made certain you’re not, you may have to turn to second chance loans to get the money you need.
It’s also a great way to rebuild your credit score, which can get you better rates on everything. This includes your car insurance, home loans, security deposits, and more. It can also increase your chances of getting a better job.
Because payday loans are expensive, only those who can pay for it 100% at the end of the term should apply for one. If you have a bill due on Friday, for example, and your payday isn’t until Monday, a payday loan is an acceptable option. You can get it within a few minutes of applying, so you can pay your bill ASAP and then pay the loan back once you get your pay.
Where to Apply for Second Chance Loans?
Second chance loans are available on various financial institutions, such as credit unions and online lenders.
To get a loan from credit unions, you must be an approved member first. You must meet your specific union’s requirements, which are usually less strict. This option is usually less expensive, but they require more effort on your part.
Online lenders are even less strict, and there are many that specialize in loans for bad credit. The good thing about this option is that you can complete the process without getting up from your seat. You can apply online, wait for approval, and then get the money through your bank account.
Either way, you should study the terms and rates with care before signing up. There are some financial institutions that try to prey on people desperate to get a loan. Whatever your credit score is, there are always loans with fair rates and terms.
Improve Your Financial Status
Second chance personal loans with bad credit are great options for rebuilding your credit history and for getting money ASAP for important matters. As with any other loan, though, you should think twice and determine if the reason for getting one is good enough.
If you decide that you need it, learn how to apply for loans next and read our other blog posts and guides for more tips.
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