What’s the price to pay when you have a FICO score of 640 or less? For one, a home mortgage will probably cost you around $50,000 to $130,000 in interests alone. Yes, bad credit can translate to huge interest rates if you compare it with those who have good credit. Another downside is when funds run short and you need a loan, your options are limited. A bad credit is not the end of the world, but it certainly makes life more difficult.
What Can You Do?
The answer would depend on how much money you need and how soon you need it. If you need it to buy a home or a car, you can avail of secured mortgage loans for bad credit. Though this may be easier to get compared to unsecured loans, there are times when you still get turned down by the bank or lender, and in this case, you can consider subprime loan. This is a type of loan specifically for people who lack creditworthiness, but this is not recommended for long-term financing, as interest rates will bury you in debt.
If needing immediate funds less than $1,500, there are payday loans available. Such loans are excellent choices for people with bad credit because most of these lenders do not run credit checks. However, expect to pay a high interest rate because payday loans for bad credit are considered high risk. You will need to pay them back after 14 days, or you can also request to roll over the loan amount once it reaches the maturity date if certain financial obligations will prevent you from being able to pay them in full. Note that there is no such thing as monthly interests for payday loans but instead you pay a one-time charge. For example, if you loan $100, the charge could be around $10 to $15, which means that you need to write a check for $115 that will be withdrawn by the lender after 14 days. If you cannot pay the loan in full during that time, you need to inform the lender and request to renew the loan. In this case, you just need to pay the $15 charge and the $100 principal amount that you owe will be rolled over to another 14 days.
Other Options for Bad Credit
A personal loan or a credit card cash advance is recommended because charges are lower than payday loans. A personal loan is an unsecured loan which can go as low as 7.99% APR, and with longer payment terms. Credit card cash advances can only be available if you still have sufficient credit limits. Usually, the amount you can cash in is 30% of the limit; the upfront fee is around 2% to 4%, plus monthly interests of up to 4% until such time this amount is paid.