When you apply for any kinds of loans, lenders will look at your credit history and credit score as their consideration. This is intended to help them determine how risky it is for them to lend you money.
Your credit is considered bad when you have a low credit score. And this can be caused by various factors, such as late payments, short credit history, or maxed-out credit cards. But do not be worried, because there is a finance company with bad credit.
Such a finance company allows you to apply for a loan though you have a bad credit. If you are not familiar with it, here is what you need to know about a bad credit loan company.
What is a Finance Company with Bad Credit?
As the name implies, a bad credit finance company is the one that offers loans for those with bad credits.
The loans from these finance companies are either unsecured or secured by collateral like the borrower’s car or home. Interest rates, fees, and terms for bad credit loans are varied by lenders.
Various online lenders, credit unions, and banks provide loans to borrowers with bad credits. But the limit for what is considered a creditworthy borrower is varied by institutions.
Some bad credit finance companies have stricter requirements compared to others. So, it is important to find the best option possible.
Though your poor credit score will prevent you from getting a good Annual Percentage Rate (APR), it is still possible for you to find interest rates that are way lower than with options like salary loans or credit cards.
Tips to Choose the Best Finance Company with Bad Credit
1. Eligibility Requirements
You can see the list of eligibility requirements on the lenders’ official websites. These eligibility requirements include minimum income levels, minimum credit scores, and also maximum debt-to-income ratios.
2. Interest Rates and Fees
Each bad credit finance company uses different criteria to calculate your interest rate and fee. It is better to get quotes from several lenders, then compare some important factors, such as origination fees, interest rates, and prepayment penalties. This will help you to decide which one has the most affordable loan interest for you.
3. Repayment Terms
Personal loan lenders probably offer repayment terms from a year to 12 years. A longer repayment period means reducing your monthly bill. While a shorter one will get you out of debt sooner.