Undoubtedly, installment loans minimize the risk of falling in debt, as you do not have to pay the whole amount in lump sum. Borrowers with good credit reports can easily avail these loans at lower interest rates but bad credit borrowers will end up with paying relatively high-interest rates.
The term for these loans varies from three to 12 months. When it comes to taking out a loan, you must have to consider your repayment capacity. Installment loans for bad credit from direct lenders carry unattractive interest rates due to which there are high chances of falling into a debt spiral.
Just because you will pay your loan in regular installments, does not mean that you will instantly grab the offer. Yet, there are some factors, you should consider before applying for the loan.
Each lender follows different policy and chances are that you find variations in interest rates as well. The cost of debt is not what you owe but what you have to pay. It is crucial that you compare deals before sealing the deal.
The sooner you pay off, the sooner you get rid of debts. If you have space to settle your debts early, you must go for it. Make sure that your lender does not charge prepayment fees. Even if your lender has not informed you about the prepayment clause, you should go through all terms mentioned in your loan agreement.
Not all installment loans allow amortized payments. When you take out these loans, make sure that your lender approved of amortized payments. Amortising means your every payment will go toward both the principal and the interest. Otherwise, you could end up falling into debt.
Bad Credit Loans with Guaranteed Approval Exist
If your credit score is poor, your borrowing options are limited. A score under 620 is below average and as a result, a traditional lender will sign off on your loan application. Now you have only one option – direct lenders.
If your score is bad, you can take out the loan but at high-interest rates. Your lender will not run a hard credit check and therefore, you will bear the risk of losing your credit scores. Oftentimes, you find advertisements like “bad credit loans with guaranteed approval,” but is it a real thing?
What is guaranteed approval?
Guaranteed approval means your lender will approve your loan application regardless of your credit history and repayment capacity. Though online lenders are flexible with terms, it does not mean that they do not follow the minimum criteria.
A reliable and trustworthy lender will always consider your repayment capacity before transferring funds to your account. It is obvious that the lender will want to have money back. Why would they lend you money if you cannot afford?
Trustworthy direct lenders run a soft credit check to know the risk of default. They may turn down your application if your credit report shows up huge default risk.
Beware of ‘no credit check’ sign
‘No credit check’ loans entrap millions of borrowers into a predatory debt cycle. Bad credit loans with guaranteed approval require neither hard credit nor soft credit check. In fact, lenders offering such deals do not care about your repayment capacity. At last, you end up with permanent debt cycle.
You should choose a reliable lender if you need financial assistance. Though your lender will examine your reimbursement capacity, you are also responsible to determine whether or not you will be able to pay back the debt timely.