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What Exactly is a “Bad Credit Loan” and Why do People Get Them?

prudent1You may have heard the terms personal loan, line of credit, credit card and are familiar with these credit products, but as of late you may have also heard the term ‘bad credit loan’. What exactly is a bad credit loan and why do people get them?

A bad credit loan is one that is tailored to people who have bad credit. Unlike banks who slam the door in your face for not being perfect, some companies do the opposite and don’t want to deal with prime credit customers, instead focusing more on second chances and giving people a fresh start.

The key to getting a bad credit loan is choosing the right one.

Let’s start with the WRONG ones:

  • Payday loans. Payday loans are a popular form of bad credit loan. Wait! Although these are popular, this is actually your WORST option. Payday loans are incredibly expensive and they don’t report to your credit. Once you get one a snowball effect can follow, leading to even bigger credit problems that you started with. Stay away from payday loans!
  • Loan sharks. These are private people who give loans, some in exchange for your jewelry, kind of like a pawn broker. Like payday loans, this is expensive and you stand a high risk of losing your things if something comes up and you can’t pay on time. They are called sharks for a reason.

Ok, so we’ve told you where not to go for a bad credit loan, so what is left?

  • Finance companies – this is your best choice. A finance company, one with an office, is far more legitimate and will report to your credit report. Loans are amortized over a year or more with an option to pay off early, feature less interest and fees than the above two, and there is no collateral to hand over.

What is crucial with a finance company is finding the right one. Unfortunately, even though some advertise bad credit loans, most won’t help a previous bankruptcy or individual in a consumer proposal. Do not go all over the place putting inquiries on your credit, killing your credit score. Call around and be honest about your credit.

Prudent Financial offers bad credit loans to regular people every day – even people who are undischarged in bankruptcy or those with consumer proposals once they have been paid down by 2/3. Call us today at 1-888-852-7647.

 

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