Loans for poor credit can be a great way for borrowers without good credit to get the funds they need fast. But you may be wondering whether now is a good time to get a loan. Whether you have to cover day-to-day expenses or pay an unexpected bill, quick loans for poor credit can be a useful option. Let’s dive deeper into how quick loans for poor credit work and how you can decide whether now is the right time to get one:
How loans for poor credit work
Loans for poor credit are loans with less strict credit score requirements. With these loans, lenders will consider factors in addition to your credit score, like income and employment history, when deciding whether to approve you.
If you’re not sure whether you have poor credit, you may be wondering whether these loans are right for you. Your credit score is calculated using several variables that are available in your credit report, like your payment history and the amount of outstanding debt you have. Scores are divided into levels that range from “Excellent” to “Poor.” Excellent is a score over 800, and poor is one below 580.
Loans for poor credit borrowers are considered riskier to the lender because of the applicant’s credit history. Lenders mitigate that risk by charging higher interest rates and fees. On a positive note, they also report your on-time payments to the credit reporting bureaus. So, consistent on-time payments can help your credit score gradually improve over time.
Deciding if now is the time for a loan
To decide whether now is the right time for a quick loan for poor credit, consider your financial situation and needs. If you need to cover an emergency or essential expense, a loan can get you the funds you need right away. Here are some expenses a quick loan for poor credit can cover:
- Medical bills
- Car repair bills
- Home repair
Getting a credit builder loan to boost your score
If you want to get a loan solely to improve your credit score, you can get a credit builder loan. A credit builder loan doesn’t work like a traditional loan. Instead of getting the money up front and paying it back, you make monthly payments for a set number of months and then get the funds. Each payment is reported to the credit bureaus as an on-time payment, so credit builder loans will help improve your credit score. That classifies them as poor credit loans.
Credit builder loans are typically short-term loans. Some lenders even place the principal in an interest-bearing savings account or CD, so you could earn a little extra by the end of the term.
The bottom line
Loans for poor credit can be great options for those that need fast cash or just want to improve their credit score. To decide whether now is a good time to get a quick loan, consider what expenses you need to cover. Then, compare lenders and loan options to find a loan with good rates and terms. With a quick loan for poor credit, you’ll be able to get out of a financial bind more easily and get back on track.