Bad credit can feel like a life sentence. Borrowers with bad credit are often turned down for important loans, such as mortgages, by lending institutions like banks. Therefore, these borrowers tend to let go of their dreams of owning a home or car, or getting a graduate degree. However, this situation doesn’t need to persist. As the number of borrowers with bad credit has risen, a crop of alternative investors has propped up to provide loans just for individuals with less than stellar credit histories.
What is a Bad Credit Loan?
It isn’t uncommon to find yourself in a situation like this. If you have bad credit, you can also look to Refresh Financial’s loans. They can help you get a loan on your terms and build your credit quickly.
Credit bureaus rate consumers by considering their ability to pay back debt, such as those incurred by credit cards. Many consumers fall behind in paying back some of these loans. Their debts pile up, and their credit ratings plummet.
Individuals with bad credit are considered high-risk borrowers by conventional lenders like banks. Most people with low credit are automatically disqualified from certain types of loans. However, some lenders factor in the risk and provide bad credit loans. These loans have generally higher interest rates than regular loans because they are largely unsecured and the risk is high.
Such loans are not offered by conventional lenders like banks. They are often offered by alternative lenders. There are different types of loans, such as secured home equity loans, and more commonly, unsecured personal loans. Payday loans are the most widespread form of no credit loans, and they come with shockingly high interest rates. For secured loans, borrowers can offer a home, a vehicle, real estate or other valuables as collateral.
How Much Do Such Loans Cost?
As mentioned before, because there’s higher risk involved, bad credit loans tend to have higher interest rates than normal. Interest rates vary between secured and unsecured bad credit loans.
As secured loans have collateral involved, the interest rate may only be slightly higher than a good credit loan of the same nature. The interest rates are highest for bad credit payday loans. The APR for payday loans can be as high as 100%. Some loans are offered with a floating interest rate, so the cost for the loan will depend on how good the market is doing.
How to Stay Safe When Taking Out a Bad Credit Loan
Bad credit loans can help borrowers in dire financial straits to pay for emergency expenses or other loans on which they are about to default. Borrowers have the flexibility to take out a small amount like $500, or a larger amount, possibly over $5,000. Even though some loans are easy to get approval for and are convenient, customers must be aware of spurious lenders.
Most importantly, be aware of the interest rate and service charges. All such charges being billed monthly should be clearly indicated in the loan contract. Borrowers are advised to scrutinize their monthly bills for any excessive service charges. Borrowers should also understand the terms of repayment, and whether or not grace periods are allowed.
They are strongly advised to only take out bad credit loans from licensed agencies. Do not borrow online without doing some background research on the company first.
Where to Get a Bad Credit Loan in Ontario
The following lenders provide legitimate bad credit loans in and around Ontario:
Tribecca—A private lender that offers bad credit loans for emergency medical expenses and for borrowers to rebuild credit.
Prudent Financial—Offers bad credit home, car and personal loans.
Addison Credit—Offers loans for lenders with no credit histories or tarnished histories with bankruptcies and repossessions.
Dixie Auto Loans—Provides bad credit car loans in Mississauga and Brampton.
Fast Access Financial—Offers bad credit personal loans.
Easy Financial—Offers bad credit equity loans.