Bad credit loans are designed for individuals that have poor credit, but also need to obtain small loans quickly. If used responsibly, bad credit loans can be a great resource for low income earners. If you don’t make a lot of money, you most likely have no savings account for emergencies. Therefore, when an unexpected expense does arise, you can obtain a bad credit loan to cover your costs and act as a cushion until your next paycheck.
How To Use a Bad Credit Loan
Bad credit loans often come with high interest rates that are used to offset the risk of lending to individuals with poor credit, Sarah from bad-credit-loans.ca blogs about these issues frequently. However, if you are a low income earner that is not prepared to pay back your bad credit loan on time, you can rack up a lot of debt. It is best to only obtain bad credit loans for amounts that you are able to repay within mere weeks. This means that you simply use a bad credit loan as an advance on your paycheck and repay the loan after you have caught up with your unexpected expenses. Most bad credit loans are short-term loans that must be repaid within weeks. This means that failure to repay can result in additional fees and interest charges. If low income earners understand the risks of bad credit loans, they can better avoid falling for this common pitfall. Some lenders use very risky tactics and hidden fees to make their business extremely profitable, take a look at Wonga’s ad commercial video for instance:
Benefits of Bad Credit Loans
Although bad credit loans come with higher interest rates and shorter payback periods, there are still many advantages associated with this type of loan for low income earners. Bad credit loans have very simple qualification terms and simply require you to have a checking account and proof of employment, something that auto lenders may take advantage of. You are normally given a bad credit loan based on your weekly income. This means that bad credit loans are often for small sums of money, but these small sums of money are easier for low income earners to repay. The subprime mortgage crisis is a classic case of bad credit loans which could happen in australia.
No Established Credit Necessary
Unlike traditional loans, you don’t have to have great credit to qualify for bad credit loans; instead credit is not a part of the qualification process at all. This is ideal for most low income earners, because many low income earners have poor credit and can’t qualify for traditional loan options. This means that when an emergency arises, bad credit loans are often the only option. This type of loan can be helpful to low income earners if used responsibly and repaid in a timely manner.