What is a bad credit loan?
Bad credit loans are short and long-term loans that are meant to be paid back according to the terms of the agreement in the pre – disbursement contract with the loan company. Companies that offer these products are mostly based online and act as intermediaries between the borrower and the lender.
The term “bad credit” connotes that the credit facilities are in place to aid low-income earners overcome the burden occasioned by inadequate funds.
Bad credit loans are different from payday loans in that repayments are not made on paydays but according to the payment frequency contained in the pre-agreement contract between the lender and the borrower. Since most bad credit loans are facilitated by companies online, these contracts are electronically signed and disbursement of loan follows as soon as the loan request is approved by the lender.
However, much like payday loans, some bad credit loan companies often charge exorbitant interest rates on both short-term and long-term loans. This is so because of the risk involved in giving a one-time loan to low-income earners with appalling credit scores.
How do bad credit loans work?
As opposed to regular bank loans – often laced with a relentless effort by the bank to investigate credit score – lenders of bad credit loans are not necessarily interested in the credit score of the applicants.
In addition to this, bad credit loans require no document presentation and the repayment cycle is scheduled by the company to adapt to the pay frequency of the borrower.
However, companies are often tasked with the responsibility of sourcing the following information from the borrower for the lender’s appraisal before any loan can be granted:
- Average monthly and yearly income
- Employed or self-employed and sometimes, the size of business.
- Bankruptcy history
- Present debt burden.
- Credible referee to cosign loan contract.
This information is often favored over credit score information since most low-income people often have a not-too-appealing debt history.
When the lender is satisfied with the details of the borrower, the money is paid directly into the bank account of the borrower within 24hours of the loan application.
What are the benefits of bad credit loans?
The benefits of bad credit loans are numerous but not limited to the following:
Payments can be done in installment
As opposed to the provisions of other loan products like payday loans, some bad credit loan companies offer the option of making repayments in installments. This is to ensure that the repayment of large sums of money – spread across several months – can be paid with ease.
A large amount of money can be borrowed
Short-term loans that involve large amounts of money are guaranteed by most lenders, giving room for the borrowers to tend to other minor debts within the timeframe of the loan.
Rebuilds your credit score
Bad credit loan companies often update the loan and financial debt department of your approach towards loan repayment. As such, your general credit record improves making you a suitable candidate for loan approval anywhere in Canada.
Where can bad credit loans be obtained?
Bad credit loan companies are operational in all provinces in Canada including Alberta, British Columbia, Manitoba, Ontario, Nova Scotia, and Saskatchewan. However, companies like 24cash are not operational in Quebec, Saskatchewan, and Manitoba for reasons not made available to the public.
Moreover, applications to these companies are usually carried out online, accounting for the general flexibility of bad credit loans.
Eligibility criteria for bad credit loans stipulates that candidate must:
- Be 18years or older
- Be a Canadian citizen
- Have a Canadian bank account
- Have a steady job or income stream
- Have a low short term debt ratio
However, a loan application can be turned down when the borrower:
- Has undischarged bankruptcy
- unstable employment
- Is below 18
- provides incorrect information
How to know a suitable bad credit loan company?
To guarantee ease of transaction with a loan company, it is pertinent for a borrower to look out for the following information about the company
- Added fees
- Interest rates
- Penalties
- Credible Credit score update
Conclusion
Bad credit loans are essential and help augment the discrepancies in a tight budget. With bad credit loans, sorting out urgent needs for finance has never been easier. Moreover, the lenders of such facilities have no regard to the credit score of a borrower, as opposed to regular banks. The only catch is that such loans often come with high interest rates depending on the discretion of the lender since such loans – not requiring collaterals – are considered to be unsecured loans. In Canada, bad credit loans are provided by companies like Easy financial, Loan connect, Loans Canada, Loan away, 24cash, personal loan pro e.t.c
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