As more jobs that were once decent-paying have been replaced by part-time, minimum wage employment, more Americans than ever experience periodic financial distress. Unfortunately, it is usually the people who most need access to credit and short-term loans who are afflicted with bad credit ratings.
The idea that people who suffer from bad credit cannot get a loan, however, is false.
While it is true that people with genuinely bad credit will usually not be able to get unsecured, low-interest loans for five or six-figure principal amounts, there are still many short-term financing options to choose from for those who may not have the best credit histories. For instance, if you’re in need of an installment loan for your bad credit history, lenders online are willing to work out a deal. The borrower will need a checking account and proof of income to be approved and the money can be available as soon as the next business day.
It is always important to follow the terms of the loan agreement exactly, making sure to make all scheduled payments on time. The two major pitfalls of short-term loans are not abiding by the terms of the loan, thus racking up large penalties and late fees, and using the loans as a form of revolving credit. While advance loans can be an excellent source of once-off funding for emergencies, they generally make a terrible form of revolving credit, with rates and fees that are far too high to make rolling over this form of debt economically viable in the long-term
Another source of short-term emergency loans is through car title loan companies. Unlike unsecured cash advances, which usually require little more than a proof of income and a checking account, title loans are a form of secured debt. This means that the lender is given the right to foreclose on collateral, usually the borrower’s vehicle, if the terms of the loan are not adhered to.
While the prospect of being theoretically subject to losing one’s car may sound frightening, in practice, title loan companies almost never actually take possession of borrowers’ cars. Cars make terrible assets, constantly losing value even when in storage. Simply being repaid the principal amount is far more valuable to the lender. Therefore, a title loan company will usually do everything in its power to work with the borrower in order to ensure that they are able to repay the loan in full.
But title loans also have a major advantage over short-term loans for some borrowers. While a typical short-term lender will usually only authorize an average loan amount of around $500, a title loan company will authorize loans based on the value of the borrower’s car. That means that many borrowers may qualify for loans of up to $10,000 with a title loan company.
However, as one with bad credit should know by now, borrowing money requires paying it back on time and in full going forward. Whether taking out an unsecured short-term loan or one backed by the value of a vehicle, responsible repayment is essential if improving credit is the goal.