Applying for a bad credit loan can seem like a low-risk, high-gain decision to some people. But before you decide to apply for one of these Guaranteed loans for bad credit online, it’s important to carefully weigh the benefits and risks.
Benefits
- A bad credit loan can give you access to money that you might need in a financial emergency. These loans are short term, and may be made for a period of anywhere from three months to two years. A typical maximum term for a bad credit loan is five years.
- The interest rate on a bad credit loan is typically higher than the interest rate on many other types of loans, like secured or unsecured personal loans. Since these loans are usually made to people who have experienced a financial hardship, the lender knows that they will have trouble paying back the loan.
- Borrowers who understand the interest rates and other loan terms involved with a bad credit loan can choose which type of bad credit loan will be most affordable for them. The lender may make several different types of loans available, and you will want to choose one that fits your budget so that you won’t have trouble paying back your loan.
- Applying for a bad credit loan can help you to build your credit history if the lender reports your account to the three major credit bureaus—Experian, Equifax and Transunion. When a lender reports the status of their accounts to each of these agencies, they send an electronic file that contains all of the pertinent information related to your account, including late payments and missed payments.
Risks
In the case of low-credit loans, the lender could turn you away and close your account, which would lead to a total loss of whatever funds you have deposited already. And in the case of high-credit loans, you’ve got the chance to lose funds and incur expenses more quickly than expected. The chances are even higher if you’re considering some high risk lenders (like those who deal with bad credit people), as they tend to have higher interest rates than others.
And one last thing, it’s important that you understand your personal situation before applying for a loan or answering an offer from a potential lender. While you can’t predict the outcome of your situation, or what might happen in the future, there are certain red flags that may not be as obvious as others. Keep an eye out for them and don’t ignore them.