Different credit repair companies say, millions of Americans suffer from a dismal FICO credit score well below 620. When these people are look for financing, the only options facing them are bad credit loans, loans with repayment rates that are incredibly high and terms that are incredibly strict. These kinds of loans only end up further damaging most people’s credit because any default becomes an instant recipe for credit score disaster.
How Do People End Up With Bad Credit In the First Place?
The journey to bad credit is one slippery, fast moving slope that’s incredibly difficult to stop. It usually begins with poor debt to credit ratios from maxed out credit cards. New credit is difficult to establish when other cards are completely maxed out. If any of these existing lines of credit were used to make monthly ends meet then loan default becomes a foregone conclusion.
Once you default on existing debt, your credit score plummets even further. To improve your credit you not only need to pay down debt to make your debt to credit ratio stronger, but you also have to now get current on all of your credit lines first before you can even think about paying down the debt. If you’re living paycheck to paycheck, finding the extra money to pay debt down can be difficult.
Seeking Help With Bad Credit Loans
Exercise caution when investigating bad credit loan options. Some loans are incredibly predatory, and some loans, that if appropriately used, and paid back promptly, can get you back on the road to credit score recovery. No matter how you ended up in the poor credit zone, like the millions of other Americans struggling with this problem, you deserve to be given a loan that provides a reasonable chance for recovery.
Secured Bad Credit Loans
There are two types of bad credit loans: secured and unsecured. Be careful of secured loans such as payday advances aka payday loans, or loans requiring the forfeiture of your vehicle title. Many of the creditors who issue these type of loans use unreasonable terms that are hard to meet and end with the confiscation of whatever piece of property you used as collateral whether it be an automobile or a home.
Unsecured Bad Credit Loans
Unsecured bad credit lenders do not require collateral. Instead, they carry strict repayment terms and extremely high interest rates. If you feel you’re ready to tackle a bad credit loan, take the time to do the proper amount of digging to identify the loan with the best terms for you. Some lenders will offer APRs as low as 16% if your credit score is 580 or above, but you’ll have to search to find these.
If you can avoid it, ditch the bad credit loan and repair your credit the old-fashioned way. For some people, this isn’t an option. But for many, a little bit here and there can be saved by cutting out the non-essentials of life and applying those savings each month to outstanding debt. It’s a slow process, but one that’s absolutely worth making. Because credit repair is a long term investment to a better future.