If you are facing a financial crunch and are looking for unsecured personal loans, be ready to pay high-interest rates. Financial institutions are more likely to lend money to people with bad credit than banks.
They say, “money is not everything,” but they forget that you can buy anything if you have money. The need for financial assistance can arise for anyone; only the reasons might differ from person to person. The process of borrowing and lending is intricate; the person who is borrowing wants the money without any hassle, and the person or institution lending it wants guarantees about repayment. One of the things that helps faster processing of loan applications is the credit score, but for some, maintaining a good rating in this volatile economy is proving to be difficult. For such people, applying for personal loans is not an easy task. However, there are financial institutions that lend money to such people.
One of the most referred credit scores by lending institutions is the Fair Issac Corporation (FICO) score and if you have a bad rating, the chances of you getting a loan are slim. If you have a financial emergency and need money to pay medical bills to improve your credit rating, home improvement, or just for going on a holiday, there are a few options that you could look at for securing personal loans. One of the widely available for people with bad credit is subprime loans; these are the ones with high-interest rates. Some of the options are:
Payday
These are typically for a small amount and for a stipulated period of time. A payday loan is the one that is given against your next pay check; you can avail of it online very easily. Their interest rates vary from 15 – 30 percent and the duration is also very small. These are subprime loans offered to individuals with bad credit. For a better understanding, if you are looking for a one of USD 1,000, then you will have to give a post-dated check of USD 1,000, plus the processing fees to the lender. These are very easy to secure, and most people take them to improve their credit rating by paying the installments of their previous loans on time.
Installment
These are just like payday loans, but their repayment structure is spread out over a few pay checks. Installment loans are a better option than payday ones just because the repayment is broken down into small amounts, making it easier to repay. These unsecured options are gaining in popularity as they require no collateral. Their interest rates are also quite high, but the time limit is more than the payday ones. Some of the reasons why people go for this one are medical emergencies and mortgage repayments.
Government
Billions of dollars of grant money is lying unused in the government coffers, due to lack of information and awareness among the general population about the procedures for securing these loans. The government has also created the Office of Departmental Grants Management and Oversight (ODGMO) to ensure the distribution of billions of dollars to the needy population. Government loans have very low-interest rates, and the terms of repayment are also relaxed and do not strain the financial condition of the borrower. All you need is some perseverance to find the right category, under which you can apply for one and be ready to fill out forms and complete the documentation process.
Differentiating between “Needs and Wants” is the key to financial freedom and it will benefit if you have this concept clear before applying for one. If you are not confident about your future earnings, taking a loan can put a strain on your already difficult financial standing.
