One of the few positive results of bad economy is finding a wider availability of loans for completely devasteted credit. Bad credit limits your choices. You may be denied an apartment rental or be passed over for a new job.
You will pay higher rates for insurance and find deposits required if you open new utility accounts when you move to a new home. That home will be a rental as you won’t qualify for a mortgage if you have bad credit.
The Most Common Request
The most common request for loans is for consolidation loans. If you have ruined your credit because credit card payments are too high or you have high interest debt that is draining you financially, it may be wise to obtain a loan to pay off all the small debts and have only one payment to make each month.
This might be a good option for you if your bad credit rating was caused by job loss, loss of your home or a medical emergency that drained your finances.
A consolidation loan could help you get back on your financial footing and start over and the payments made to the new loan would help restore your credit rating in time.
Financial mismanagement and reckless spending will not be solved with a consolidation loan. If your credit file is filled with bad reports as a result of irresponsible behavior adding more debt will not change your habits.
The Power of Credit Agencies
Credit reporting agencies are powerful and affect many more things in our lives than we realize. You may spend many years making mortgage and loan payments on time and build an excellent credit file.
One year of unemployment and the resulting late payments on accounts can destroy the rating built over years. Lenders realize this and if your credit is horrible due to a financial catastrophe, there are companies that will help you get started again.
One easy way to obtain (small) loans for horrible credit is to use one of the short term loans known as “payday loans“. With a cap of only a few hundred dollars, qualifying for a payday loan requires only having a source of income and a bank account. There is no credit check or collateral required.
The payday loan is often listed under the paragraph “loans for people with devastated credit” and referred to as predatory lending. It’s true the interest rates are exorbitant.
These loans are often made to lower income people and the big problem is that the $300 easily borrowed today means you pay about $360 back in 2-3 weeks.
The great danger in such a loan is that after you’ve paid back the loan from your paycheck in 2 weeks, you are $300 short on that paycheck.
You are spending money you will earn in the near future. This leads many people to take another payday loan right after paying off the first one and can be a cycle difficult to break.
Another no credit loan with a higher loan amount is called a “title loan”. If you own your car you can trade the title for money and even make payments on the loan.
The interest rate is extremely high which can make it difficult to repay this loan. Many states allow title lenders to grant an extension of the loan in exchange for paying only the interest fee for the previous period of time. For consumers, this is a dangerous loan.
Although the lender can extend the loan, he doesn’t have to do that. Many of the abuses reported for these car title loans stem from lenders who willingly extend the loan again and again and then without warning demand full payment. The lender is holding the title to your car and non-payment transfers the car to the lender.
There are many sites offering loans to people with horrible credit. The worse your credit history is, the more you will pay for such a loan.
If you have really bad credit you are a high risk person to lend money to. You can improve your bad credit but expect to pay higher interest with loan terms that are not optimal. It may be necessary to accept poor loan terms in order to begin to rebuild a credit history.