Bad Credit Loan - Borrow With Caution!

The bad credit loan is a loan for borrowers with credit score below 620. In times of economic meltdown it is easy to fall behind your mortgage or credit card payment. You have been laid off, you have huge medical bills, you got divorced or you had a family emergency and missed a payment. Due to the economic crices as an extra precaution many banks reduced the limits on the credit cards, often up to the amount of the money borrowed. Even if you have never missed a single credit card, mortgage or other loan payment just for this reason alone you credit score has dropped significantly.

The good news is that if you have a bad credit you can still get a loan. Lenders understand that things can happen in life and anyone could run into situation that causes credit problems. There is a bad news though: bad credit loans have much higher interest rate and in case of a mortgage or car loan they require higher down payment and more points to be paid to warrant the risk to the lenders.

There are different types of bad credit loans:

1. Debt consolidation loan is designed especially for people with credit problems and higher debt. They can help lower the debt and consolidate it in one lower monthly payment. Caution! Debt consolidation loan reflects negatively on your credit score.
2. Payday loan is an instant loan for people who are in the need for immediate cash and they cannot wait for their paycheck. They have bad credit or no credit and they borrow money against their monthly salary.
3. Bad credit home loan is known as “subprime loan” and it is offered to borrowers who cannot qualify for a prime loan. If you are approved, go for it and consider it a short term solution until you repair your credit and refinance to replace the bad credit loan with a prime loan, which have much better terms and will save you a lot of money.
4. Bad credit car loan has much higher interest rate and requires higher down payment.
5. Credit Cards for customers with insufficiant or bad credit.