The recent global recession increased the need for loans for bad credit for two main reasons. Firstly, banks, loan providers and other financial institutions have placed greater restrictions on approving loans. Secondly, more people have found themselves in financial crisis where they have a bad credit rating making it more difficult to apply for loans through regular channels.
In fact, for most people, bad credit loans are the only option available to them whether they need quick cash in an emergency situation or want to finance the purchase of a car or even property. There are a variety of different bad credit loans available:
1. Salary Advance
These types of loans are ideal to meet the requirements for quick cash to tide you over until your next salary is paid. However, there are some pitfalls to taking a salary advance loan that you need to be aware of. Salary loans need to be repaid in full within 30 days or when you receive your next income.
The interest and other fees are much higher than for regular loans which could result in difficulty making the entire repayment when it is due. This often results in the need to take out an additional loan to make ends meet. It is advisable to only apply for a salary advance loan that you can afford to repay without impacting your regular expenses.
2. Quick Cash Loans
Cash loans for bad credit have a longer repayment period, normally around 6 months but can be up to a year. This allows for loan amounts that are larger than those for salary advance loans as the full amount, including interest and other charges can be spread over a period of time making the repayments more affordable.
However, these loans often cost you much more in interest in the long run. Once again, it is important to only apply for an amount that you need and that you can easily afford to repay.
3. Loans For Finance
These provide the longest term available depending on the type of finance you require but could be anywhere from two years (for vehicle or asset finance) to twenty years (for property finance). In these cases, the vehicle, asset or property you are buying stands as security for the loan amount which will be repossessed by the loan provider should you default on the repayment.
You may also need to meet with some additional requirements for these types of loans:
– Provide a security deposit or down-payment.
– Provide additional collateral or assets as security.
– Provide a person to cosign the loan as a guarantor who will be responsible for the full amount should you default on your repayments.
– Provide a reserve fund that can be used to cover repayments for a specific period should you find yourself in financial difficulty or be unable to make the repayments.
Although all these types of loans are not ideal, they do at least provide an option for quick cash or long term finance in the event that you have bad credit.