Incessant cash crunch and impending list of outstanding expenses typically define the state of your credit health. With poor score and a shortage of appropriate funds to meet your liabilities, it natural to look for swift bad credit loans. However borrowing with bad credit score comes with several challenges.
From conventional lenders to private finance companies, there are not many who are willing to extend financial support to people with poor credit rating. A lot of unscrupulous finance companies are also active as loan sharks. And those who come forward to extend bad credit loans, charge very high-interest rates.
So being a person with low loan eligibility it would be a task to hunt down a cheap bad credit loan. However, with the right bent of mind and professional guidance, you can get rid of this hurdle as well. You can seek a free broking advice and get educated about several important aspects of bad credit borrowing including the loan amount, rate of interest, loan instalment and its impact on a credit report.
Let’s discuss each of the aspects in detail below and find particularly about instalment loans for bad credit rating.
Making a decision: Payday or Instalment loans?
For urgent cash requirements, you ought to look for instant cash advance such as payday loans. However, the decision to opt for payday loans does not entirely depend on the cash requirement. Before picking up payday loans you need to assess repayment responsibility attached with it.
Payday loans call for lump sum loan repayment on your next salary day, while instalment loans ease the payment burden by dividing the loan amount. It is highly recommended to opt for instalment loans for bad credit score.
Your credit situation and purpose of loan collectively define the duration of the loan. Generally, if you need urgent small loans to meet temporary glitches of life, you can choose small loans such as 1 month or 2 months loans on weekly basis. Being small loans, the impact on credit health is also a short one. As you close the account successfully it would help your credit score too. The overall cost of the loan is also not very high as you would pay interest for only a couple of months.
However, if you already have outstanding debts and financial obligations and need moderately high loans to improve your credit situation, you can choose 6 month loans. These can be drawn on fortnightly or monthly instalments, depending on your credit requirement.
Common Mistake to avoid
Many people with bad credit rating, choose longer loans to keep the instalments low. However, it is a financial blunder as you would ultimately pay the higher amount. The smaller instalment could be a great attraction for a bad credit loan, but it also comes at an added cost of the loan.
Rather than opting for 2 years loan, you should try to restrict your loan to 12 months loans. There are advantages of availing short term bad credit loans:
1. Low cost of loan- The smaller is the duration of the loan, the lesser is the cost of a loan.
2. Low stress- With small loans, the stress of being in debt remains for short period too. Thus small loans are less stressful.
3. Impact on Credit Score- As you successfully close the account, you also improve your credit score. So the impact of short-term loans is positive as far as you repay it on time.
You can contact a loan broker and make an informed decision today. For, making good history is one of the best ways to erase the bad history of your credit report.