All You Need To Know About Bad Credit Loans

All You Need To Know About Bad Credit Loans

What is Credit Score?

To check your credit worthiness your previous credit information is checked. A low credit score puts you in the category of bad credit.

The Factors that Determine One’s Credit Score:

  • Payment History- Number of defaults, late payments, timely payments, etc. all these play an important role in deciding your credit worthiness.
  • Current Due Outstanding- How much you owe currently is also checked by the lender to assess will you be able to pay their loans overdue on time or not.
  • Credit History- Longer credit history makes it easier for the lender to assess you better by inquiring into your total credit activities. People with zero or no credit history fall short on this parameter.
  • Credit Mix- Having credit in different areas such as mutual fund, saving, stock, etc. indicates your ability to manage your financial responsibilities.
  • New Credit Enquiries- Anybody who is applying to multiple credit loans reflects their instability and in excess of liability than assets, thus impacting your credit performance.

Various credit score tools used world over are- CIBIL, Experian, Highmark, etc.

Bad Credit Loans

Loaning on Bad Credit:

Even if one figures into bad credit list that doesn’t mean they can’t borrow money. However, these loans typically have more obligations such as higher interest rates, greater restrictions and so on. This way, the lender covers for high risk involved by them.

There are various types of bad credit loans one can opt for to get excess to credit and also improve their credit rating:

  • Secured and unsecured loans- If you have small default, you can opt for unsecured loans because there is low possibility of you defaulting. However, if there are many previous outstanding, you should opt for secured loans by put any of your assets as collateral.
  • Guarantor loans- Someone from your family or close friend may sign up for being the guarantor on your behalf in case you fail to repay.
  • Debt Consolidation Loan- In this case you compress your multiple loans into a single loan thus simplifying your repayment.
  • Credit Union Loan- Various SHGs, co-operatives vouch for collective owning for loans. Lenders prefer group loan over individual because risk is distributed. However, credit unions may have certain criteria to membership such as- only women, only senior citizens or only farmers, etc.

Now that you are aware of what bad credit is and how one ends up in being a bad credit using various credit scores, it will be easier to find your way in getting a loan under bad credit loans.

Merchant Cash Advance – Best Option For Bad Credit Business Loan

Merchant Cash Advance – Best Option For Bad Credit Business Loan

Small business funding are rarely easy to secure, therefore, you have the biggest advantage to make by opting for business cash advance for securing capital for your small business. It is very much apt for you if you accept payment from your customers via credit cards. You are not required to pay any minimum amount every day rather just the agreed percentage of your daily credit card sales. Therefore, this does not put any undue pressure to pay back the money during periods when flow of cash slows down.

Economic conditions:

With the stringent contemporary economic conditions securing a loan from a bank has become a challenge for entrepreneur and business owners. Credit score is considered a very important criterion by banks while lending money. It would be comparatively easy for you to secure loan if you have good credit scores. But this not what happens in business as when you have to take high stakes business decisions you are sometime lead to poor credits. Securing business loans for bad credit from a bank or other financial institution is nearly impossible as they focus only on credit scores and often ignore great businesses.

The only way left with entrepreneur is find the ways by which they can get their business scores back on track. But this may not be possible in many cases in the absence of substantial funding. Therefore in any case securing loan or funding is essential to boost the business and improve your credit scores.

Business Loan

Low credit scores

As entrepreneurs with low credit scores often find challenges while securing business loans from banks, therefore they should rather think and look beyond these financial institutions. In such situation alternative lending options are the savior of these entrepreneurs because they focus on the strength of the future business and do not depend upon your credit history of your business while taking decision for lending you the money. Some of the alternative lending options are cash advances, business lines of credit and credit cards which are most reliable for business funding.

Among the other alternative lending options merchant cash advance loans most sort after by entrepreneurs. It provides you an unsecured cash advance for business even if the credit score of your business is poor. In this type of financing you get the cash advance on the condition you pay back the advance by allowing the lender to take a percentage of your credit card sales every day till the complete amount of the advance has not been repaid. Generally approval for cash advance is based upon the potential and volume of your business and the future prospect of the business and do not take into consideration your credit history. Therefore, these funding options show a new ray of hope to entrepreneurs with bad credit scores.

Auto Loan: What Does It Mean and What Are Its Types

Auto Loan: What Does It Mean and What Are Its Types

A car nowadays is a necessity instead of a luxury item. It provides people hassle-free travel without depending on public transport and increases the social status.

A loan means borrowing a certain sum of money from banks and financial institutions required to be repaid in a particular time frame with interest or as per the agreement.

Similarly, an Auto loan is a kind of loan which the person takes out for purchasing a new vehicle. They are generally 2 to 7 years, and the interest rate depends highly on the credit score.

There are different types of auto loans available. You can choose what suits you the best among them.

Auto Loan

Types Of Auto Loans

  • Secured Auto Loan

These auto loans are generally famous because the lender puts the vehicle as collateral. The collateral gives lenders the right to take possession of the vehicle in case of non-payment of installment.

  • Unsecured Auto Loan 

These are the opposite of secured loans. There is no collateral in place for this type. If the payment of an installment is missed, the lender cannot take possession of the article but have to try to get their payment through other legal methods.

This is the reason such loans come with higher interest rates and fees.

  • Simple Interest Loan

It is the method of calculating the amount to be repaid at the end of the term. The amount paid to the lender comprises the principle plus the interest. Under this method, most of the amount goes towards the interest payment. Only a part goes towards the principal so that the interest is paid-off first, and by the end, you are only paying the principal. It helps in the early repayment of the loan.

  • Pre Computed Interest Loan

Under this method, the interest is calculated at the beginning and divided over the term in equal parts.

  • Direct Financing

Under this, the loan is taken from the lender directly, and no middlemen are involved. Example: Taking loans from banks and financial institutions.

  • Indirect Financing

Unlike direct financing, in this, there is the involvement of middlemen like car dealerships. It is less time-consuming, but the involvement of the third party might increase the annual percentage rate (APR).

These are some of the divisions under Auto Loans. Now it’s up to you what you choose and what you feel seems best.