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Emergency Loans With Bad Credit: Can I Get a Loan With Bad Credit?

Apr 2, 2021 | Credit Score, Financial Freedom, Financial Services, Financial Wellness, Good To Know, On a budget

Getting a loan in the best of times can be difficult but getting emergency loans with bad credit can prove impossible. Here is how to get the cash you need.

In America, 60% of people cannot cover a $1,000 emergency bill. Many people must use their credit cards to meet their bills. But, this isn’t the best option.

What are the options for emergency loans with bad credit?

You might believe that because your credit score is not good you don’t qualify for fast cash in an emergency. But, there are several options to get past the challenges of medical bills, car repairs, and other reasons you might need emergency funds.

You aren’t limited to using the money for an emergency. In fact, you can use the money for debt consolidation or avoid checking account overdraft fees.

But it is important to remember that getting a loan with bad credit may come at a higher interest rate.

What Hurts Your Credit Score?

There are several common reasons why you may have bad credit. Let’s start at the beginning and discover why you may have bad credit. Although there are many ways it can happen, here are some of the most common credit traps:

Your Monthly Bills

When you don’t keep track of your finances, you may not have enough money at the end of the month to pay your bills. One study in 2018 found 35% of people missed paying a bill because they forgot about it.

In 2017, more than $23 billion in credit card debt was more than 30 days overdue. Currently, many people pay their bills automatically. Yet, 65% of people didn’t know how much they spent the last month.

This can add up to not having enough to pay your bills or even forgetting them. Some people hope the company will eventually give up and stop sending bills.

These plans don’t pay off and usually result in a bad credit score.

If you don’t pay your bills, they may be sent to a collector. These are companies that specialize in collecting debts that people owe.

Filing bankruptcy or defaulting on your home mortgage also hurts your credit score.

Open or Closing Credit Cards

Each time you open a new credit card or loan, the company does a hard credit inquiry. This means they check your credit to be sure you can afford to pay for a new card.

Each hard credit inquiry can drop your credit score.

Closing old credit cards can reduce your debt-to-credit ratio. This is the difference between how much you owe on the credit card and how much you can spend.

This means having a credit card with a zero balance can improve your credit rating. This is especially true for an old credit card you have had for years.

An old card establishes a longer credit history, which is one of the factors in rating your credit score.

Making Minimum Payments

Even if you pay your bills on time, a high balance on your credit cards can help to lower your credit score.

Making minimum payments also affects your debt-to-credit ratio. When you have used more than 30% of this ratio it can affect your rating.

Your total credit and debt across all your credit cards and loans determine this ratio. This means if you have a high balance on one card but zero balance on others, the ratio is balanced between all cards.

The Side Effects of Bad Credit

There are several consequences to having bad credit. Your credit score helps determine the interest rates you pay on credit cards and loans.

You may have problems renting an apartment. Landlords check your credit rating and may refuse to lease if you have a low credit score. You may have to pay more on your security deposit if they do accept you.

Even utility companies check your credit score during the application process. Cell phone companies may deny a contract. Some jobs in the finance industry turn you down if you have a history of bankruptcy or outstanding bills.

Insurance premiums can be higher and you will likely pay more in interest for a car loan.

Where to Get Emergency Loans With Bad Credit

Getting a loan with bad credit is possible, but you may need to pay a higher interest rate. There are several types of fast emergency loans you can consider:

Payday Loan

In general, this is not the best option in a financial emergency. Many times the interest rate can be 400% or higher.

You also have to pay the loan off completely within a couple of weeks. Hence the name payday loan, which is an advance against your paycheck.

Credit Card Loan

You may have a credit card that will offer a cash advance. But, like a payday loan, it can be expensive

The interest begins immediately and is usually higher than when you buy something. Credit card terms can also be confusing. Paying minimum payments on the card can create a false sense of security.

A Signature or Personal Installment Loan

One of the best options for an emergency loan, when you have bad credit, is an installment loan. These give you a longer-term to pay the loan and often offer larger amounts.

You sign a contract that shows you the fixed payment amount, so you always know how much you pay.

Personal loans or signature loans do not need collateral. This means you guarantee the loan with your signature.

Title loans require that you guarantee the loan with the title of a vehicle or property. If you’re unable to pay the loan, the lender can get their money through the sale of your property.

Signature loans offer more flexibility and less interest than a payday loan. They are also less risky for you than a title loan.

Another benefit of a personal loan is it helps you to build your credit score as you pay off the installments.

An Emergency Loan Can Help Quickly

Are you in a tight spot? Our team can guide you through the easy process of applying for a personal installment loan.

You could be approved quickly, even for emergency loans with bad credit.

The loans are different in each state. So, visit our installment loan center and discover what we have available to help you.

Written by Stan Timmons

Stan is a journalist, novelist, illustrator, magazine writer and comic book creator. With a lifetime of being a freelance creator, he’s learned a thing or two about saving money, building credit and living smart.

The information provided is for informational purposes only and is not a substitute for professional financial advice. You should consult a credit counseling professional concerning the information provided and what should work best in your financial situation. And any action on your part in response to the information provided is at your discretion.

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