Bad Credit Loans: the Basics

Life is tough if you have problems with your credit score. Just a few years ago it was next to impossible to get a loan with a bad credit. People had a really difficult time back then. Things have changed recently. These days most people have at least some problems with their credit histories and finding a person with a flawless credit history is almost impossible. Naturally, all payday lenders have changed their approach to such loans. More and more people are starting to use bad credit loans in financial emergencies of any sort. These loans are part of reality, so you need to have at least some understanding of how these loans function.

Luckily, not much needs to be memorized about loans for bad credit. All payday loans are relatively small cash advances that are given to people against their next paycheck. The amount that can be borrowed varies from state to state and depends on the amount of money that you earn each month. In most cases you can borrow up to $1500 that you will have to return when your next paycheck is delivered into your account. The borrowed amount will simply be withdrawn from your account. If you fail to repay the loan on time, you can apply for a loan extension and pay a special extension fee.

All bad credit loans can be divided into two types – secured and unsecured loans.With a secured loan you will have to provide some kind of collateral against the money that you borrow. You can use your house, car or any other valuable asset as a guarantee of repayment. This security is very much valued by lenders. It allows them to assign lower interest rates to their loans. Basically, taking a secured payday loan is much cheaper for you. But it is also much riskier: if you do not return the money on time, you will lose your valuable property. With unsecured loans for bad credit you do not have to provide any valuable asset as a guarantee of the repayment, but you have to pay really high fees for such loans. If you do not want to risk your property and decide to get an unsecured loan, remember that these loans have been created specifically for financial emergencies. Their fees and interest rates are so high that you should never use them as a regular way of getting additional money. Such loans might be good once in a while, but using them on a regular basis will only get you into deeper debt. Still the final decision is up to you.

If you decide to get a bad credit loan to cope with serious financial emergencies, keep the following in mind.As the name of such loans clearly suggests, nobody pays attention to the borrower’s credit score when their eligibility for the loan is evaluated. You can forget all about your troubled financial past. You need to focus on your present. Your current job and your regular income will be the main determinants of your eligibility for the loan. Some lenders demand that you hold the same position for at least three or six months. Others will want to see a letter of reference from your employer. Plus you need to be at least 18 years old and have an active bank account. If you meet the basic requirements of your chosen lender, you will have no problems getting your bad credit loan. You will need to complete a loan application either by phone or online, get an official approval and wait for the money to arrive in your account.

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