Shopping around and comparing costs is always one of the top tips we often read or hear from financial experts. Whether you're in need of a loan or credit card, we are always advised not to rush in our choosing. But just how do you compare your choices of loans effectively?
Surf the internet and you'll find hundreds of choices of lending companies offering a variety of loans for bad credit. Taking your pick can be confusing. But if you try to narrow down your choices one step at a time, you have a greater chance of finding the best bad credit loan for you.
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What type of loan do you need? There are specific loans for specific needs. Mortgage loans, car loans, business loans, debt consolidation loans, personal loans- each category is based on where the borrower intends to use the money.
Are you going to buy a new house or a new car? Are you going to start a business? Do you need to consolidate your debts into one? Do you need funds to renovate your house? Whatever your need is, you can find a specific poor credit loan that is designed for the expense you need.
Secured Loans and Unsecured Loans
Loans are also categorized as secured and unsecured. Secured loans require collateral or a security to be submitted by the borrower. Usually, secured loans have lower rates and do not necessarily require a very high credit score.
On the other hand, unsecured loans can be availed without the need to submit any form of security. These loans often have higher rates of interest and will most likely require the loan applicant to present an excellent credit standing or a high credit score. Unsecured loans are also easy to avail because the procedures in filing for an application are not as complicated as secured loans.
Finding the Right Bad Credit Loan or Sub-Prime Loan
Obviously, bad credit loans are meant for loan applicants with damaged credit or low credit scores. Lenders who offer instant approval loans will also demand more expensive interest rates to make up for the risk of their clients. This doesn't mean you should settle for any bad credit loan. Even if you have a low credit score, you still deserve to find a lender who will offer a reasonable interest rate on your loan despite your poor credit.
Aside from the interest rate, there are other factors of the loan that you should check on. Don't be tricked into getting a loan with an incredibly low interest but with expensive miscellaneous fees and charges. To get a better idea on the actual costs of your loan, it's best to compare the APR as this calculation often includes the processing fees, miscellaneous costs and the interest rate of the loan.
Fixed-rate and Variable-rate Loans
The type of the interest rate also differs between each loan. Bad credit loans with fixed-rate interest do not change for the whole duration of your loan's term. Meanwhile, variable-rate loans are subject to change depending on the status of the Prime Rate in the market. Watch out. Although variable-rate loans may start out low, the costs can suddenly increase within your loan term. In this case, fixed-rate loans for bad credit give you more assurance and peace of mind that you can afford your monthly payment until the end of your loan's term.
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