Adverse Credit Loan

It is a simple matter for a person to ruin their credit history. An unexpected job loss, sudden medical bills, or other matters of income loss can keep you making your current payments. A few late payments on the credit cards, the car, or the mortgage, and you may find yourself no longer having a viable credit score. Without good credit your chances for being given a regular loan, whether it be personal, home, auto, or business, are reduced to nil. When that new loan becomes extremely important buy your credit is keeping you from getting it, you will seek help from anywhere.

That’s where companies offering adverse credit loans come in. These companies promise to give you the money you need even if you have bad credit. Some of these companies are outright scams. Others will give you the money if you have a stable income, but at a price. There was a time when bad credit meant getting a loan was impossible. Today, that loan may not be impossible, but it does come at a steep price.

Adverse credit loans are much more expensive than regular loans, or even most credit cards. Some lenders are willing to give you the loan, but the interest rate they are asking for can be up to 2000 times the interest rate of a regular loan. This is especially true of payday advance loans. A payday advance loan is a short-term loan, usually only two weeks, but at an annual percentage rate (APR) of 500% to 2000%, depending on state law and what customers will bear. A regular loan is usually at an APR of 3% to 7%. Some lenders offering adverse credit loans will not make you pay this steep of an APR, but they can still be at 30% to 50%. In addition, if the loan is for something that will be used as its own collateral, such as a house or car, the lender will require a steep down payment. The down payment could be as high as 40% of the total cost, depending on your exact credit score. In addition, some companies tack on extra fees to the loan, which they are rarely upfront with disclosing.

Because of these reasons, most financial experts advise against ever taking an adverse credit loan. Only two possible benefits will arise out of the loan. First, you will be able to complete your purchase without having to save up the total cost. In some situations, such as for a car, this can be very helpful. Next, the adverse credit loan will go on your credit report, and if you pay it off in a timely manner, your credit score will raise. However, this is not a good enough reason on its own. There are much better ways of raising a credit score than having to pay such exorbitant interest.

One type of adverse credit loan is the debt-consolidation loan. These lenders take all your other debts and pay them off with a new loan, so you are only making one payment. It seems very convenient. The problem is that the interest on the new loan is often higher than what is being paid off. In most cases, debt-consolidation loans do not help. If you find yourself in a situation where this seems like a good idea, contact one of the licensed, non-profit debt management services in your state. They will tell you the real scoop, and they can help you reduce your debt and your monthly payments without you having to take out a high-interest adverse credit loan.

Many adverse credit loans are also outright scams. These usually involve advance-fee loans. This is when a lender promises to give you the money you need, but you have to pay them a fee before they will process the loan. In many of these cases, the lender simply skips town with your fee and is never to be seen again. Most of these scam lenders operate either by telephone or online.