Having a bad credit rating is a common thing these days. With the current economic situation, millions of Americans have lost their jobs and defaulted on their mortgages, resulting in poor rating. If you find yourself on the same boat and you need quick financial assistance, you will likely find it hard to obtain loans from traditional lending institutions such as banks because these financial institutions have strict lending standards. Thankfully, there are other lenders willing to help you: the online lenders. Here are some facts you might want to know about bad credit loans and online lenders.
1. These lenders operate online
Online bad credit loan lenders are financial institutions that emerged during the recession to meet the high demands for loan services. Unlike the traditional lending institutions such as banks, online lenders mostly operate online, although some of them also have a physical location. This means that you don’t have to personally visit the lender because all you need is an Internet connection to contact them and send your application.
2. Bad credit loans are not only designed for people with poor credit rating
Although online bad credit loans are originally designed for people with poor rating, even those with excellent payment history can apply for them. Because online bad credit loans can be obtained in 24 hours or less, they have become a popular option for anyone who needs fast financial relief.
3. Online bad credit loans usually offer small amounts
While the amount you can borrow usually depends on the lender and your credibility as borrower, generally online bad credit loans offer small amounts ranging from as low as $50 to $2500 and to as high as $15,000.
Online bad credit loans offer small amounts because they are short-term loans payable in days to a month, although some lenders have a repayment term of 3-6 months. Thus, the amount you can borrow will depend on how much you can afford to pay within the lender’s repayment term.
4. Online bad credit loans are not for large purchases
Obviously, since bad credit loans only offer small amounts and usually have short repayment terms, they are certainly not used for major purchases such as car and house. Unless necessary, they are not even ideal for expenditures such as home renovations and travels.
5. Higher interest rates
Because bad credit loans are not secured and don’t require good credit standing, it is not surprising that lenders charge higher interest rates. However, it is important to note that although the interest rates are slightly higher, online bad credit loans should not be compared with regular secured bank loans that have lower interest rates, as they are two different types of loans. Online bad credit loans are usually payable in a month while regular secured bank loans usually have a repayment term of a year to a few years.
These are just some of the facts you might want to know about bad credit loans. Before applying for one though, it is important to make sure that you are dealing with the right lender.