Bad Credit: Personal Loans

Bad Credit: Personal Loans

Consumers having low credit scores often have a difficult time obtaining personal loans. Although there are times when they are able to obtain loans, interest rates can be very high. This can be very frustrating for them.

High interest rates cause consumers high monthly payments which may be a considerable strain on their finances. If you want good credit, click here for a free consultation.

Consumers with high credit scores are always able to obtain personal loans with lower interest rates. Consumers with low credit scores will have to show proof of income and jump thru hurdles in order to obtain bad credit personal loans. If consumers finally do get approved for these loans, the loan amounts are very low due to these low credit scores. Consumers with high credit scores obtain fast approval on these loans not having to jump thru so many hurdles as consumers with low credit.

The two most popular types of bad credit personal loans are the signature loan and the pay day loan. A signature loan is a loan that can be secured by the consumer simply securing the loan based upon his signature on a note promising to repay the loan. These bad credit personal loans will cause the consumer to pay high interest rates and high interest payments. Consumers with high credit scores are often able to secure the same loans at lower interest rates and lower monthly payments.

Here’s an example of two consumers: consumer A and consumer B. Let’s say that Consumer A has high credit scores; consumer B has low credit scores. Both consumers obtain a $10,000.00 signature loan. Consumer A only pays 6% interest while consumer B pays 80% due to low credit scores. Over a 5 year period, consumer A pays $3000.00 in interest; consumer B pays $40,000.00 in interest. Consumer A pays $37,000.00 less in interest then consumer B just by having good credit. If consumer A invests the $37,000.00 wisely, he will double his money and have $74,000.00 in cash; consumer B will be flat broke. Now you can see the power of having good credit.

The next type of loan, the pay day loan, is one of the most expensive types of loan there is. The consumer borrows money from the payday loan lender, just enough money to tide them over until their next paycheck. When the consumer gets paid, they pay back the loan plus interest which varies from 20- 30%. Consumers will often not have enough money to repay the loan when it becomes due. This is when the payday loan company will extend the loan for a fee this is what’s known as a renewal fee which is the same amount as the interest. The lenders will allow the consumers to renew the loans up to 3 times as long as they pay the renewal fee. This is where the consumer gets into a big financial mess paying 4 times the amount they borrowed. I hope you now see the power of having good credit. Raise your low credit scores today.