How Good Are Bad Credit Loans?

If you are caught in a financial pinch with bad credit and you are looking for solutions, you may think "loan" and wonder just how good are bad credit loans? The whole issue comes down to semantics and the meaning of "good" and "bad" in your own mind.

All persons who are looking for loans may come across headlines or advertisements that offer "bad credit loans" and they may ask how good are bad credit loans? What are the repercussions to having credit when you go searching to borrow money? If you don't have a good credit why would getting another loan be considered a "good" thing?

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First of all, if don't have a good credit, you have made mistakes on previous loans or credit accounts. You may have a history of making late payments or no payments at all. You may have a previous bankruptcy or foreclosure on your credit history. These are all indicators of a person who either has insufficient income, or who does not know how to manage their money wisely.

Once you don't have a good credit, it can take years to get improvements in your credit record. With a bankruptcy entry, the negative will be around for at least ten years before it is dropped off. Other bad debts may last several years. Trying to improve your credit record is a long process which can also take years. If you have had debt consolidation programs, or loans, those are more negatives on your credit record. Even if you are in a consolidation or debt management program, your credit record will suffer before it begins to improve.

So, how good are bad credit loans? At the minimum, not having good credit loans involve high risk for the lenders. They compensate for high risk by charging outrageously high interest rates. If you resort to payday loans, you could pay from 400% to over 1000% or higher interest rates on a yearly basis. Those types of credit loans are not a good thing because of the high interest and their short term of payday to payday. Many people who cannot get loans elsewhere resort to cash advances against their next payday and then get trapped in so deep they cannot get out. Those bad credit loans are not good!

If you can find a financial institution willing to work with you, you will still incur higher interest rates because you are a high risk borrower. It is best if you can work with a regulated financial institution like a bank or credit union because their interest rates are capped by state laws. They may only be able to charge you up to 36% interest instead of ten times that amount. These loans would be a "good" bad credit loan.

How good are bad credit loans? As good as your credit record will allow. Work on improving your record by making timely payments and reducing debt before you seek a new loan. Even bad credit borrowers can get a good deal eventually.

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