If you have bad credit, then you might assume that you cannot get a loan. The fact of the matter is this is not really the case. Even if you have damaged credit, there are places that will still give you a loan.
There are firms that offer financing to people with damaged credit. Locating these companies is half the battle. With the extensive growth of the Internet, locating these businesses is easier than ever. However, finding shady businesses is also easier than ever. After finding a company that will extend you credit, you need to do your due diligence and conduct thorough research. Contact the Better Business Bureau and look for any complaints that have been filed. Also use your favorite search engine and look for online complaints that are connected to the company you are considering.
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Another great place to find loans is by talking to family and friends. Word of mouth is still the best way to find great companies. You probably have a friend of family member who also has less than perfect credit. They might have arranged financing in the past, and can provide you a detailed account of their past experiences.
There are a couple of things that you will want to be on the lookout for when trying to get financed with bad credit. The first is higher rates. The cost of bad credit is higher interest rates. You are a higher risk to the company offering you credit, so they are going to insist on higher interest rates so they can cover their risk. Also be on the lookout for hidden fees and read the terms and conditions carefully. Normal fees include origination fees, processing fees, and annual fees, just to name a few. Fees can greatly increase your cost of credit, so be sure to evaluate the fees and interest rates carefully.
Consider the following example:
You are offered a loan for $2000. The terms are 12 months repayment, 19% interest, compounded annually, and a $49 loan fee. What is the real interest rate you will be paying?
First, figure out the total of payments:
$2,000 x 1.19 = $2,380
Second, add the loan fee:
$2,380 + $49 = $2,429
Now figure the actual APR (annual percentage rate), or cost of credit:
$2,429 / $2,000 = 1.21
Thus, the real interest rate on this loan is 21% when taking the loan fee into account.
There are a lot of companies out there that will try to hide the real expense of a loan through the use of fees. Be sure to take all of the loan terms into account when you are considering a loan. This is especially true when you have bad credit.
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