Bad Credit Loans Blog

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We received this blog below from The Phoenix Group, https://thephenixgroup.com/.  Thought it would be good to share for those interested in improving their credit score.

Many Americans who have bad credit still need to get a loan. Having a FICO score of 620 or lower is considered in the bad credit territory. A score this low prohibits one from getting a loan under reasonable terms, but that doesn’t mean it’s impossible.

It’s vital to know your score before you apply for a loan, and if it’s not where it needs to be, consider working to raise your credit score before you apply.credit score pic

What Does Bad Credit Mean?

Our consumer culture encourages people to buy now and pay later, and many people are happy to do just that. And, unfortunately, many people aren’t adequately educated on responsible financial practices and end up ruining their credit rating, which makes it tough when applying for a car or home loan. Being smart with credit, and knowing how to fix bad credit, are essential for your financial well-being. As stated, bad credit is a FICO score of less than 620. A score of 630 or higher is considered fair, and 720 and up is deemed to be good to excellent.

What is a Bad Credit Loan?

A bad credit loan is a loan given to those people who have lower than average credit scores. These loans are typically high interest and come with many fees, but if you need a loan and have bad credit, you’ll have to take what you can get. The key to a bad credit loan is to repay it quickly and never miss a loan agreementpayment; doing these two things significantly improve your credit score.

What’s the Difference Between Secured and Unsecured Loans?

There are two main types of loans for which one can apply: Secured and unsecured loans. The secured loan requires the borrower to put up some collateral such as a home or vehicle to guarantee payment. Lenders typically give unsecured loans to people who have proven themselves trustworthy with credit, and who have good to excellent credit. Both of these loans can be helpful to build up your credit, but the key is to be vigilant about making payments and to pay them off quickly.

Types of Secured Loans

A payday loan gives a person fast cash. The borrower writes a check that they give to the lender who cashes it on the borrower’s payday. Another type of secured loan is a Title Loan. This loan uses your property as collateral to guarantee repayment. Property can be real estate or a vehicle. If you default on the loan, the lender gets the title to your property. Both of these loans are helpful for building credit but beware of the high interest and fees that come with them.

Types of Unsecured Loans

If you have bad credit, you may still qualify for an unsecured loan, but be prepared for interest rates from 100 to 300%. Most of these loans require a credit score in the mid to upper 600s.

Two important keys to rebuilding your credit are to be on time with your payments and to carry a low credit to debt ratio.

If looking for other tips to repair your credit, you may try this link with Top 20 Credit Repair Blogs, https://blog.feedspot.com/credit_repair_blogs/
 

At America’s Loan Company we focus on consumers with less than stellar credit scores.  The “Bad Credit Personal Loans” is all over our website.  This does not mean that our loans are guaranteed regardless of credit score.  We have certain standards to follow.  Is just that, we are willing to loan to Ohio debt signsconsumers who may not be able to get a loan from a bank or credit union.  Historically, we have not found it difficult to find applicants with bad credit whom we felt were “acceptable risks.”  However, in the past two years we are finding it more difficult to find qualified applicants.  The underlying reason in our recent experience is that people are acquiring too much debt.  Here’s some of the negative trends we have noticed.

Personal Loans Are In Demand

So, what is some of the cause for the increase in personal debt?  Personal Loans have increased in popularity recently.  According to a TransUnion blog dated 6/1/18 by Matt Komos (follow this link to read this blog https://www.transunion.com/blog/consumer-credit-origination-balance-delinquency-trends-q1-2018) comparing first quarter of 2017 to the first quarter of 2018, Personal Loan debt rose by 7.8% among Subprime Borrowers. Credit card debt also rose 3.3% within that same group.  As Subprime Borrowers are the ones we tend to serve, the effects of this increase are evident.  Now we are seeing applicants debt on chalk boardwith debt to income ratios above 45%.  Debt to income ratio is calculated by taking the minimum monthly payment on debts divided by gross monthly income.  America’s Loan Company aims to be a responsible lender.  So once an applicant’s debt to income ratio reaches 45% it prevents the application from being approved.

To Make Matters More Difficult, No All Loan Companies Report To Credit Bureaus

Another somewhat invisible cause of increase in personal debt and dare I say it, defaults, are loans from companies that do not report to any credit bureau.  After applications are received and reviewed, documents are requested, such as bank statements.  Years ago we started doing this looking for any inordinate amount of non-sufficient fund (NSF) fees, which to us is a red flag.  However, now we not only look at NSF’s, we also look for lenders that appear on the bank statements.  It amazes us how often we find bank statements with four, five, six payday or title loan lenders as either depositing or debiting the bank accounts.  Payday lenders and Title Loan lenders do notheavy debt loadtypically report to the three major credit bureaus.  This is the reason for which we refer to these types of debts as “invisible.”  As these types of loans have loser underwriting standards, combine that with the rise in credit card and Personal Loan debt, it is our observation that consumers seem to be getting into more debt than they can handle.  We can no longer depend solely on credit reports to determine how much debt a person is responsible for.

It is our most recent experience that consumers seem to be acquiring more debt than they may be able to handle.  We don’t have a solution for that, except that consumers need to start treating debt as a “use only when needed” service.  Also, we believe lenders need to be more responsible, not only for the consumer’s sake but for their own also.  Too much debt can only end in credit default.  No lender likes financial loss and no customer likes receiving collection calls and having their credit scores negatively affected.  As a side note, for those consumers who are looking for ways to repair their credit you may visit this link with Top 20 Credit Repair blogs: https://blog.feedspot.com/credit_repair_blogs/

America's Loan Company offers Personal Loans for people with bad credit.  However, our loans can help improve your credit score.  The reason for this is that America’s Loan Company reports credit histories to one of the three major credit bureaus, TransUnion.

You Mean A Good Payment History Can Improve My Credit Score?

credit score picIn short, yes.  According to a blog by Experian, another one of the three credit bureaus, “Paying your bills on time is the most important contributor to a good credit score.”  You can read more at Experian’s blog by clicking here https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/.  So, getting a bad credit personal loan from us may help improve your credit score as long as loan payments are done on time.  Even if one of your payments is dishonored by the bank, immediately taking care of that payment should help to keep improving your credit score. 

Don’t Ignore Other Debts, however.

Even if you paid your loan with us faithfully, not paying on other debts will have a negative effect on your credit.  Other debts include credit cards, student loans, phone, gas, electric bills, etc..

So Should I Get A Loan Just To Improve My Credit Score?

No.  No one should.  Having too much debt can work against your aims of improving your credit score.  The same blog from Experian mentioned above advises against such practice.  Borrow only what you need and when you need it. 

Should I Get Loans From Many Other Lenders To Improve My Credit Score?

According to the same Experian blog, this is a bad idea.  When the need comes to borrow funds for an unexpected bill, America

credit card approved

’s Loan Company does offer bad credit loans.  However, if the credit bureaus see that you are borrowing from too many lenders, this will work against your credit score.  New inquiries from other lenders for instance, will show up as hard inquiries, which have a negative effect on the credit score. 

So, As Long As I Make My Minimum Payments, It Is Okay To Max Out My Credit Cards? 

That also does not work well to help improve the credit score.  Credit bureaus do look at what balances your carry compared to the available credit.

Rebuilding your credit score can take some time.  However, following some of these simple rules above can help you start on the right path.  Do click on the link above for more details from Experian.

An unexpected expense comes up.  You don’t have enough to cover it in you “rainy day bucket.”  So, may be you’ll get a Personal Loans paid over several biweekly or monthly installments.  Loan contract is signed and you are handed a check or cash.  All is good. 

personal loan approved

Reality sets in

Imagine you got a two year Personal Loan.  Then, as the installments become due, you may wonder “Two years is a long time and I’ll be paying all that interest.  How can I save some money here?”  I don’t blame you.  Two years is a long time to be paying on a debt.  Even if you have “good” credit, a $1000 installment loan over 24 months at a 10% interest rate, assuming that the lenders does not charge other fees like credit investigation fees or loan origination fees (which financial institutions may charge), may cost you about $107 at the end of the term, if all payments made on time.  Monthly payments would be about $46.  It won’t take that many months before those monthly payments start “getting old.” 

So, how do you save some pennies and shorten the term?

Because a lot of the Personal Loans are amortized, most of the interest is payed towards the beginning of the loan.  In these types of loans interest is paid on every pay period before any portion of the payment is applied to principal.  As interest is calculated based on outstanding principal, the lower the principal balance will lead to a lower interest being charged.  Therefore, if you make extra monthly payments, in addition to your regular payments, and you request save moneythat the extra payments be applied towards principal (thus causing the principal to get reduced faster), then you will end up paying less on interest.  Also, by paying extra towards the principal the term will be shorter.  Even if paying extra reduces the term by just a couple of months, that’s a couple of months where you will not need to make payments.

 

But, what if I don’t have much left over income to pay extra?

Every little bit helps.  Don’t be discouraged if all you pay is an extra $10.00 a month.  For a $1000 loans, for example, if you just pay an extra $10.00 a month towards principal, you will reduce the principal by $100 in just 10 months.  That’s $100 in principal that you won’t be paying interest on. 

seal of ohioIn July 2018 the Ohio legislature passed Bill 123 intended to curve the fees charged by companies that offer Payday loans and Title Loans.  This bill was then signed by Governor John Kasich.  As to when this bill will become effective, I can only guess January 1st of 2019.  The bill mostly addresses the Ohio Short-Term Loan Act with adjustments to that existing law.  However, it also tweaks the Second Mortgage Loan Act and the law regarding Credit Services Organizations.  Although we would not advocate cash advance loans as the best financial option, we do disagree with most of the news sources which are declaring this a victory for consumers and how much money it will save consumers.

Will it really save consumers money?  A little background first.

Short term loans have been around long before the Ohio legislature agreed to approve licenses for lenders to provide payday loans.  Before the regulated Payday loan laws in Ohio, if a person needed some cash and didn’t have a friend or relative to help or a bank to approve him for a loan, then that person could choose to not pay the bill or borrow money from an unregulated and/or untaxed entity or individual.  One of the underlying reasons for the state of Ohio providing payday lending licenses was that it provided the state with the means to tax short term loans that were already being used by the public.  Another reason is that it provided the consumer with a way to access short term loans from safe and regulated lenders or entities.  So, licensing lenders to provide cash advances or short term loans never had to do with it being the best financial option or the cheapest option out there.  It was just a practical thing to do Payday neonconsidering that consumers were already using this type of product with or without the blessing of the government. 

 

 

Will it really save money for consumers?

The reason for the claim that the new law will save consumers money is that lenders will have to charge much less for short-term loans, if they want to offer such a product at all.  Payday lenders right now charge APR’s in the triple digits.  Under this bill they are limited to an APR of 28%.  Hurray for consumers right?  But consider what is being expected from lenders.  To go from charging a triple digit APR’s to a 28% APR and, yet, remain in business, is unrealistic.  The claim that consumers will save money under this new bill is “true.”  But, not for the reason the news media would like to have us believe.  The reason that consumers will save money under the new law is because there will be very few lenders offering short-term loans in Ohio.  So, this is how consumers will save money: with no supply of credit in the form of short-term loans, consumers can not borrow, consumers don’t owe that debt, and, therefore, yes, they will save money.  But this may come at the expense of many consumer not paying some bills or expenses.  Those few lenders who remain offering payday loans will, in my opinion, be the ones for which such loans are a side business.  Furthermore, those types of lenders will be forced to be much more picky as to whom they loan.  A 28% APR is not leave much to make up for loses related to serving consumers with bad credit.  Therefore, lenders will take less risks in lending to people who have bad credit.  loan shark My fear, and we are not endorsing payday loans as the best option out there, is that this “heavy handed” approach that the Ohio Legislature has taken will only lead consumers to borrow money from unregulated individuals and entities. 

Need Money, But, Not A Payday Loan?

If you have bad credit and need a loan, America’s Loan Company may be able to help with an affordable Personal Loan.  Although approval is not personal loan chalkboard 480x360guaranteed, we may be able to help even if you have bad credit.  We can lend as little as $500.00, if that’s all you need, with a term of 6 months to a year.  Our loans are always made to fit your budget and help to not get you into a cycle a debt, as may happen if you get the typical payday loan or title loan.  You may apply at our website, www.americasloancompany.com, or by coming to any of our offices in Ohio.  We also report your loan payment history to TransUnion to help you improve your credit.

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