Finding a loan can be incredibly difficult when you have bad credit. Banks likely won’t want to lend to you for fear that you’ll default on the loan, and even if they do lend to you, the interest rates can be exorbitant. That said, no one should be priced out of getting the financial assistance they need when they need it most. Thankfully, there are more bad credit loan options today than ever before. These four nuggets of financial advice can help you with everything from title loans to long-term payments.
Loans Aren’t Free
First and foremost, it is vital to remember that any loan you take out will have to be paid back. The last thing you want to do when taking out a loan to pay off debts is accruing even more insurmountable debt because of terms you cannot hope to pay off. Before you take out a title loan – or any kind of loan, for that matter – you want to make sure that the amount you are borrowing is within your budget.
Take care to think about how you are going to pay the loan back. Have a plan for paying off that loan, and if possible, put it in writing.
Short Versus Long-Term Loans and Interest
The structure of that plan will be influenced in part by whether your loan is short or long-term in nature.
Short-term loans give you a shorter window in which to pay back loans, and often with higher interest rates. On the other hand, even though long-term loans tend to have lower interest rates, they can sometimes cost more.
For example, maybe you can’t pay 30% interest on a $10,000 loan now, but you can afford smaller installments at 12% interest over a longer period. You may pay slightly more, but the amount you pay each time is lower, making the pricing more accessible.
There is no right or wrong answer on the short versus long-term loan question. Your situation will dictate which one is best for you.
What You Use as Collateral
Bad credit loans such as a title loan can sometimes require you to put up property as collateral. That said, you need to be careful not to default on your loan with such high stakes. Work with your loan officer to make sure your title loan’s interest is set at a rate that you can absolutely pay back. In the case of a title loan, the title of your car is used rather than the car itself.
A title loan can be helpful, but only if you are absolutely sure you know what you’re doing and when and how you’ll pay everything back.
Seek Professional Help
All of which brings us to our last point – no matter the nature of your loan, it’s always beneficial to seek professional assistance from a lending officer. They will be able to discuss different types of loans with you and make sure you’re taking out the right one for your needs and financial situation.
With their assistance, you can start to climb out of debt and reclaim your life with the right loan for you.