Getting a loan with bad credit may seem nearly impossible, but there are thousands of borrowers with bad or damaged credit who qualify everyday with special lenders to borrow the money that they need for important purchases. If you are among the more than ten million Americans who have bad credit, you, too can qualify for these special loans with special financing for bad credit borrowers.
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Understanding Your Credit
To understand bad credit loans, you must first understand bad credit, and more specifically, how having bad credit can affect the way that you are perceived by potential lenders. Most lenders will look at your FICO credit score to determine whether or not they want to extend credit to you or loan you any money.
Your FICO credit score is a numeric value that is assigned to your particular credit situation and is the medium that lenders use to determine the risks that are associated with accepting you as a borrower. FICO is an acronym for Fair Isaac Credit Organization, and the FICO score can be from 300 to 850.
The FICO score is calculated based on a number of factors, and then weighted against the degree that each factor poses to the creditworthiness of an individual. The weight of the the factors typically breaks down to 35% punctuality of past payments, 30% amount of debt as compared in a ratio to current debt versus total available revolving credit, 15% length of credit history, 10% type of credit used, and 10% recent credit inquiries or credit obtained recently.
Special Loans For Bad Credit
As you can see, just one negatively reported item can cause your credit score to plummet, and late payments are notorious for causing detrimental FICO credit scores. But since only 11% of the population in the U.S. has a credit score of more than 800, there are many folks with bad credit, so there are loan programs that have been designed for bad credit borrowers to make a last-ditch effort to save their credit scores from total destruction.
Borrow Up To $5,000 Or More
As a borrower with bad credit, taking out a bad credit loan is a great way to add valuable points to your FICO credit score while getting the cash you need for any purpose. Most bad credit loans do not exceed $5,000, although you may qualify for more, depending upon the lender.
You may choose either a secured or unsecured bad credit loan, but you stand a greater chance of being approved for bad credit loans in the amount that you need by taking out a secured bad credit loan. A secured bad credit loan is one that is backed up by collateral that you pledge, usually in the form of your home or vehicle. The lender will place a lien against the property until you have repaid them. Taking out the secured bad credit loan will also allow you to get the loan at a cheaper rate of interest, which makes your payments lower and more affordable.