Bad credit loans are financial products designed to provide monetary assistance to people who have low credit scores. If your score is below 600, you probably won't have many options to consider and taking out a regular personal loan from a bank would be near impossible (unless you can find someone to co-sign with you). Unsecured and meant for short terms, a bad credit loan can be in the form of a payday or cash advance loan.

Getting a loan with bad credit these days is very easy, considering the fact that payday lending companies are sprouting at every corner of the globe. As a matter of fact, in the United States alone there are 25,000 payday lending companies. While very bad credit loans may seem like such a good idea when you're in a pit, it has its disadvantages.

How can I get bad credit loans?

Finding lenders that offer bad credit loans isn't hard at all. You can find many of them online, offering 1-hour to 24-hour payday loans to people who need quick money. Qualifying for these loans is easy too. Since no credit checks are performed, you can apply even if you have seriously bad credit. For most of them, you'll only need to meet 4 basic requirements:

  • You must be 18 years old or older.
  • You must be employed or have a stable source of income.
  • You must have a monthly net income of at least $1000.
  • You must own a valid checking account.

After meeting these requirements, processing is pretty speedy, especially for faxless payday loans. You can get the money you need within hours and sometimes within minutes.

What do I need to know about these bad credit loans?

Bad credit loans are generally expensive - with high upfront fees (20% to 40% of the borrowed amount) and sky-high interest rates (reaching 35% monthly). In some states, however, you can be protected by laws that prevent lending companies from incurring 3-digit interest rates on their customers. Unfortunately, this law is mandated in only 16 out of the 37 states for which payday lending is legal.

These loans are meant to be short-term and should be paid back on your next salary. Be careful though; especially if you applied online, because some loans are set to automatically renew themselves on your payday - costing you another set of fees and interest. Most of the time, these fees are automatically withdrawn out of your bank account.

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Should you fail to make payment, not only will your interest rates exponentially increase, you'll be charged additional fees and, worse, sued for damages based on bad check laws. Other lending companies won't hesitate to threaten you with criminal punishment, should you fail to make payment. Many borrowers of bad credit loans find themselves in debt traps, getting them in more trouble that what they started with. This is why you have to be extra careful when dealing with payday loan providers.

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