Getting an affordable bad credit loan should not mean that one has to settle for bad loan terms. Many companies claim to offer loans to people with bad credit. However, their terms are often very short, with high payments, and high APR’s. Sometimes they do this without taking into account whether or not the applicant can afford the payments. If you are someone who values your pennies, getting a loan that is affordable to your budget is very important.
GET QUOTES
Always aim to get a complete quote before signing a loan contract. Have the lender e-mail you or send you some written form of a quote. In that way, you can ask question when the contract is presented. A quote should include the amount to be paid monthly, the total of interest that you will pay, and the total of amount that will be paid at the end of the term. Many times the total amount paid minus the interest will leave an amount greater than what you borrowed. That is probably due to origination fees, credit investigation fees, and other fees financed into the loan. Make sure to ask the breakdown of those fees. You may find that one lender charges some fees that other don’t.
READ THE ITEMIZATION OF FEES & CHARGES
A regular lender will charge loan origination and credit investigation fees. But, be on the look out for lenders who tack on other charges, such as credit life insurance. A credit life insurance is a type of coverage that protects the lender in so that they get paid if you die before the loan is paid in full. This is a more justified charge if you are borrowing a large amount unsecured. But, if you are borrowing $1000.00 or less, it may benefit to look for other lenders who don’t add this charge to your principal. Remember that what ever charge a lender adds to the principal of the loan, you will pay interest on that. So, no only are you paying for the credit life insurance, you are also paying interest on that charge.
PAY ATTENTION TO THE APR
The APR is the sum of all fees, which includes interest, loan origination fees, credit investigation fees, an others, over a year period presented as a percentage. That is the reason that when the interest of a loan is say 25% the APR will be higher. The higher the APR is the more you are paying for the loan. Therefore, it is important to get a loan with the lowest APR possible. How high your credit score is will play a part on how high the APR will be, as it will affect the interest rate on the loan. Our advise is to avoid any APR that goes into triple digits.
As you review the loan contract, don’t feel pressured to sign it. Don’t be afraid to leave the negotiating table if a lender is giving terms you know you can’t afford. It is better to not mess up your credit score by having an loan unpaid or getting behind on payments. Remember that maintaining a good credit score will open doors and the lower the credit score is the less doors will be open to you. And please remember that borrowing from a friend or relative will most likely be much cheaper than getting a bad credit loan from a lender.
Written by Dany Quinones