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Loans for Bad Credit: Alternatives to High-Interest Loans

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In the face of unexpected events, most Americans don’t have enough cash to cover their needs. Statistics estimate that more than half of all Americans have less than $1,000 in a savings account.

It’s challenging to get through everyday life without expecting anything to go wrong. Any emergency — be it a car accident, a hospital visit, or even a broken refrigerator — will put Americans in trouble.

To add insult to injury, poor credit can make an emergency even more challenging. That’s where installment loans come in.

For consumers that have a bad credit score (below 630), installment loans can be the best option to get quick money. Installment loan funds are distributed all at once. Afterward, the repayment of the installment loan follows either a fixed monthly payment.

Online installment loans are ideal for emergencies as access to fast cash. Here’s everything you need to know before taking out an installment loan.

Online Installment Loan Basics

Installment loans are actually a broad category that includes many different kinds of loans, such as mortgage loans, car loans, and other personal loans. They tend to be long-term loans that require credit checks.

Payday loans are another type of installment loan. However, its structure is different. They must be repaid over a shorter period, have higher interest rates, but require no credit checks.

Installment Loans

As stated above:

  • Installment loans deliver quick cash in one lump sum

  • Installment loans require a credit check

  • Installment loans describe many different loan types

Furthermore, installment loan terms depend on the type of loan and can range from 3 years for car loans to 30 years for mortgage loans. In contrast, a personal installment loan lasts for approximately 12 months.

To get approval for any of the above loans, the individual will be subject to a credit check (more to know on that here: https://www.wisegeek.com/what-is-a-credit-check.htm ) and a fairly long application process.

Installment loans offer an APR of 36% or below, and user payments can be made online, over the phone, or by check.

Another advantage of installment loans is that they help borrowers improve their credit rating — as long as they pay on-time. It provides immediate access to cash, while at the same time, it’s a means to an end toward recovering a bad credit score.

How well individuals can do often depends on the terms of the installment loan that they receive. Keep reading to get more advice on how to choose an installment loan that is right for you.

Choosing an Online Lender

Like any other loan, picking a lender requires a fair amount of research and work. It’s not going to be a simple task, and there are several factors that individuals need to look out for when picking the right loans.

Below are the most important features that individuals need to keep in mind when choosing an online installment loan.

Compare Rates

All the different installment loan options out there are going to offer different percentage rates. These range from 6% to 36%, and you should sift through all possible options to get the most favorable rates.

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Ideally, individuals should opt for the lowest rates to ensure that the monthly payments are as low as possible.

Online lenders can offer potential borrowers their interest rates ahead of time. This usually requires a soft credit check, which does not impact a borrower’s credit score.

However, applicants need to be careful, as different vendors have different requirements. Understanding these requirements will help avoid any mishaps.

Understand All Fees

Every vendor has different fees, these fees might have different names like an “organization fee” or a “service fee,” but they generally range from 1% to 6%.

In contrast, other vendors might charge a prepayment fee for early repayment. Under no circumstances should a borrower agree to a loan deal before the lender discloses all fees.

It’s up to the individual to be as vigilant as possible because certain vendors will keep some fees to themselves, and may not disclose them until the last minute.

To avoid any excess costs in the future, make sure to go over the contract in its entirety.

Choosing Manageable Terms

Installment loans offer a lot of advantages for needy consumers:

But, one thing to remember is this: the longer the loan term, the higher the interest individuals will pay. Taking longer terms might give borrowers more time to pay, but it also means that borrowers will have to pay more interest.

In contrast, shorter terms are harder to manage, but it means paying a lower interest rate. When choosing the right installment loan, individuals should calculate the monthly payment based on the term length.

Many online vendors offer software that automatically calculates the amount. Everyone should employ a strategy to assess different term lengths to see what monthly payments are the most manageable.

Vendor Perks

Not all vendors are the same, and it’s already established that they offer different rates for different prices. However, while already offering different rates, vendors also offer different perks — specific features tailored to the individual.

If the individual is consolidating debt, certain lenders will send loan money to creditors on behalf of the loanee. Other vendors offer the ability to change due dates or provide hardship plans if the borrower encounters any financial difficulties.

It’s crucial to consider all these factors before taking out an installment loan. It’s best to have everything working to your advantage with an already poor credit history before taking out an installment loan.

Our Top Picks for Online Installment Loans

There are hundreds of online installment loan options out there, and looking through all of them can be a hassle. Furthermore, those new to the industry won’t be able to identify scams or loans meant to exploit.

Upgrade

Upgrade is one of the best installment loan vendors for those with a bad credit score. They accept a minimum score of 600 and will provide potential applicants with an offer in minutes. Their APR rates range from 7.99-35.97% depending on the amount, duration, and purpose of the loan. Users can easily apply for loans and get ideas on rates using the company’s website.

Simple Fast Loans

Simple Fast Loans is also among the best installment loan vendors for individuals that have a bad credit score. They offer loans ranging from $200-$3,000. These loans have terms up to 5 years.There’s no prepayment penalty, and applicants will also get next day funding. To get an idea of the rates, users can easily apply using their website.

LendingPoint

For users that have a credit score below 600, a great option to choose is LendingPoint. They accept a minimum credit score of 585 and offer loans for $2,000-$25,000. The APR rates for these loans are on the higher side ranging from 9.99-35.99%. Money becomes available to the applicant the next day, and there’s no prepayment penalty on the loan.

Avant

Another installment loan vendor for users that don’t have a good credit score is Avant. They require a minimum credit score of 580 and offer loans for $2,000-$35,000. The APR rate is between 9.95-35.99%, and they offer the ability to change payment dates. However, applicants will have to pay a loan origination fee, and there’s no option to include a co-signer on the loan.

Online Financing Options to Avoid

Online installment loans are a great option for individuals with bad credit scores, and, if used correctly, are a way to improve credit scores.

However, the same can’t be said for all online financing options, and certain ones are important to avoid.

Payday Loans

Payday loans function similarly to installment loans. In addition, they have recently been rebranded as short-term installment loans.

The loans are usually under $1,000 and are due on the next payday. With payday loans, an individual will have to either submit a post-dated check or provide access to the bank account.

It might sound relatively okay, but the issue with payday loans is that it’s nearly impossible to pay them back. Lenders will let individuals roll over the loans with more interest to pay the next day. Interest rates are typically 400% APR on these loans, and individuals get caught in the payday loan debt cycle.

No Credit Check Loans

These loans might seem like a good idea for those with bad credit scores, but they’re essentially just a debt cycle. The combination of high-interest rates, short terms, and lump sum repayment means that borrowers are stuck in a cycle of ever-increasing debt. It’s best to find loans that offer some sort of credit check and security to get the best terms.

Upfront fees

While certain loans might require a small percentage to process the application, some can be a complete red flag. There are plenty of up-front loan scams, and there are several signs that borrowers need to address. If a vendor asks for money upfront, then there’s a good chance it’s a scam.

Additionally, these issues tend to arise the most with vendors that don’t offer credit checks. Lastly, do enough research to recognize an offer that seems too good to be true.

Conclusion

Keeping all these things in mind, online installment loans are the best option for borrowers with a bad credit score. They are a useful resource and, if managed correctly, are a path to recovering a good credit score.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes



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Debt consolidation programs: How they work

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If you’re trying to pay off debt, you’ve probably looked into the variety of options that could help. If so, you’ve likely come across debt consolidation programs — and may be wondering what they are.

Debt consolidation programs can help borrowers who may be overwhelmed by debt payments by combining multiple loans into a single payment. Typically, these programs are offered by credit counseling organizations. These organizations may offer guidance and financial planning in addition to helping consolidate debt.

A reputable credit counseling organization will likely incorporate guidance to help with managing debts, along with providing educational material, workshops and other ways to help borrowers work to develop a realistic budget.

A legitimate debt consolidation program should feature counselors who are certified and trained in offering advice on consumer finance issues in order to create a personalized plan, whether it’s to address credit card debt, bad credit or other needs.

Consolidating debt typically results in a refinanced loan, with a lower or more manageable interest rate and modified repayment terms. According to the Federal Trade Commission, it is recommended to find a local debt consolidation program offering credit counseling in person.

You may find these accredited, nonprofit programs are offered through channels like credit unions, universities, religious organizations, military bases and U.S. Cooperative Extension Service branches.

(It’s important to note that everyone’s debt payoff needs differ, so your mileage may vary.)

Related: Paying off debt—9 strategies to try

What Is a Debt Consolidation Program?

Debt consolidation programs can play two roles. For one, they help borrowers combine multiple loans into a single payment, which can make repayment less overwhelming. For another, they act as credit counselors.

With tools for loan repayment strategies and debt management, they can help lower or simplify monthly debt payments. These types of programs are usually managed by credit counseling companies.

It’s good to note the difference between debt consolidation programs and an actual loan opened to consolidate debt.

Qualifying consumers can use a debt consolidation loan (typically an unsecured personal loan) to combine multiple debts into a new single loan as well, possibly with a lower interest rate. But there is no counseling offered during the loan application process, and paying down the debt remains entirely the burden of the borrower.

The services outlined above can make a debt consolidation program different from other methods of consolidation or interest reduction, such as a balance transfer for a credit card, or a personal installment loan from a banking institution or lender.

Keep in mind that debt consolidation is also different from debt settlement, which is a process used to settle debts for less than what is owed.

When enrolled in a debt management program, which is one part of a debt consolidation program, a single monthly payment is sent to the credit counseling agency, which then distributes an agreed-upon amount to each credit card or loan company. The goal of the program is to act as an interlocutor for the debt between the borrower and creditor.

While most debt consolidation program companies are nonprofit organizations, nonprofit status does not guarantee services are free, or even affordable.

These organizations can, however, reach out to the lenders on behalf of the borrower to find an affordable repayment plan, which could take shape in the form of waived fees or penalties, lowering interest rates, in exchange for a specific timeline of usually three to five years for the debt to be repaid.

These programs are not loans, which would come from financial institutions. Perhaps most importantly, debt consolidation programs do not make any promises to reduce the amount of debt owed. Those are debt settlement programs, run by outside companies who negotiate payments with creditors, and can be for-profit, predatory or may not act in the best interest of the borrower.

A debt management program, on the other hand, could help set borrowers up for future success, when it comes to how to budget and manage money, educating consumers about cutting expenses or ways to increase income in order to gradually eliminate debt.

Pros and Cons of Debt Consolidation Programs

Debt consolidation is typically most beneficial to those struggling with high monthly debt payments. Paying just the minimum balance on debts every month means it could take a long time to pay off the debt, and interest costs could continue to add to the balance. Getting rid of high-interest debts can help make it easier to pay off the principal amount of the loan.

While having a lot of debt is certainly stressful, it’s worth weighing the pros and cons of any debt consolidation program before signing up. Here are some pros and cons to ponder:

Pros

  • Multiple payments are combined into one payment, likely making it easier to pay on time.
  • Credit counseling could help a borrower get back on track with tools like budgeting and other financial advice.
  •  Some programs can help negotiate lower interest rates, fees, possibly creating a more affordable payback plan.

Note: Because lowering interest rates may extend the number of time borrowers would pay their debt off, they may end up spending more on interest in the long run.

Cons

  • Debt consolidation programs do not reduce the principal amount of debt owed.
  • They can easily be confused for more predatory programs offered by some debt consolidation settlement companies.
  • Some programs might charge fees.

Many of the legitimate counseling companies tend to follow a similar setup process, which typically includes an interview with a counselor to go over things like income, expenses, and current bills and loans. The counselor might suggest areas where spending could be reduced and offer educational materials.

The program may also help set up a budget and will send the proposal out to creditors to agree to any new monthly payments, fees, payment schedules, interest rates or other factors, Reputable programs should only charge for set-up and a monthly fee.

It is generally recommended to take extra care with any for-profit organizations requiring a lot of upfront fees, memberships, or fees for each creditor they work with on negotiation. There is no magic pill to reduce debt, so spending less and budgeting more have been key pillars of a healthy financial foundation.

No company should promise a quick turnaround for becoming debt-free overnight. Historically, credit repair has been a market tainted by fraud, so it’s recommended to tread carefully and do the research before signing on to any program.

Selecting a Debt Consolidation Program

One common and simple way to sign up for this type of debt management program is to contact a reputable nonprofit credit counseling agency. The U.S. Department of Justice offers a list of approved credit counseling agencies by state.

Along with ensuring the agency you’re considering is on this list, you may want to consider doing further research by asking your state attorney general and checking local consumer protection agency websites.

Debt settlement companies often try to sell themselves as the same service, so be wary and check to be sure the organization is offering financial counseling and not making promises to reduce the amount of debt owed.

Based on the interview and assessment of current income and debt, the counselor could either recommend a debt management program, or another solution which could be a personal loan, bankruptcy, or some other form of settlement.

The company should not promise any sort of quick fix or short-term solutions.

The National Foundation for Credit Counseling is responsible for certifying many of these counselors, who must complete a comprehensive training program certifying them to help and educate consumers regarding their finances.

Because most nonprofits are certified, it helps to read consumer reviews of these programs as well, to see how the company operates.

The next step is to check what services are offered and what fees will be charged, such as an initial sign-up fee and recurring monthly fee. Understanding the costs upfront is important, and can help someone avoid a possibly predatory, for-profit business.

Something else you may think to look out for: A settlement company may charge more fees initially on the promise to arrange a reduced lump sum payment of debts.

These companies often instruct  consumers to stop making payments entirely on their debt, which could affect credit rating and even may cause the creditor to send the debt to a collection agency. A legitimate program should offer financial advice and counseling on ways to help reduce debt.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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Village of New Paltz might expand eligibility for revolving loan fund | Local News

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NEW PALTZ, N.Y. — The village is considering expanding eligibility for a little-used revolving loan fund to include the needs of businesses being hit hard by the COVID-related economic slowdown.



Village of New Paltz trying to help residents get refunds from waste haulers

Village of New Paltz Mayor Tim Rogers




Mayor Tim Rogers said Tuesday that the $500,000 loan fund could be used to help businesses with more than just the purchase of personal protective equipment allowed under state and federal programs.

“We’re trying to piggyback off of the existing language for the revolving loan fund,” he said. “We just wanted to make it somewhat broad in terms of recognizing COVID impacts.”

One thing the village is considering is eliminating the rule that prohibits the use of the fund for emergency situations or business operations.

“Here we are flipping it and saying that you can,” Rogers said.

Guidelines for the loan program, which was established with funding from the U.S. Department of Housing and Urban Development, were last updated in 2013. The loan fund’s current interest rate is 3%.

Rogers said the fund has received only two loan applications over the past six years, and one of those was rejected.

“There’s only been one that we awarded and one that we straight up denied,” he said, noting that the rejection was because of the applicant’s bad credit history.

Rogers said the COVID-19 pandemic has created something of an economic irony in the village: decreased foot traffic in the business district but a significant increase in applications for building permits.

“[Village Safety Inspector] Cory Wirthmann believes our busy Building Department is partially a function of people traveling or vacationing less,” the mayor said. “ Money they would have spent is now going to home improvement wish list projects or just deferred maintenance, like finally choosing to replace the old roof.”

Comments about expanding the revolving loan fund should be emailed to  assistant@villageofnewpaltz.org. A loan application and information about the process can be found online at bit.ly/npaltz-loans.

For local coverage related to the coronavirus, go to bit.ly/DFCOVID19.

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Will Missing One Car Payment Hurt My Credit Score?

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The short answer is yes: skipping one car payment can hurt your credit score, but not until it hits a certain mark. One missed payment doesn’t destroy your credit score forever, but it can stay on your credit reports for years.

Missed Payments and Your Credit Score

One or two missed payments may not be enough to completely ruin a good credit score, but they can lower your credit score quite a bit. How much your credit score can drop depends on many things, including how much credit history you have and how much time has passed since your missed payment.

How much a missed payment can impact your credit score is heavily influenced by how many missed payments you currently have reported, your current credit score, your credit utilization, how many accounts you have, and more. In other words: your drop in credit score due to one missed car payment is likely to be unique to you. The drop in points could be anywhere from 10 to 100 points, or more.

Will Skipping One Car Payment Hurt My Credit Score?If you have a thin credit file or little to no credit history, one missed car payment can be devastating to your credit score. And, in some cases, having a good credit score and then a reported 30-day missed payment could hurt your credit score more because you have more to lose.

The severity of the missed payment matters too. If you’re 30 days on the payment, it’s not as bad as being 90 days late. Most creditors report missed payments in these timeframes: 30 days; 60 days; 90 days; 120 days; 150 days; and then delinquent/charge-offs after that. The longer you let that missed payment go on being missed, the worse it is for your credit score.

To bounce back from a missed auto loan payment, be sure to make that payment as quickly as you can. The sooner you make up that payment, the better off you are.

How Long Are Missed Car Payments Reported?

Missed and late car payments can remain on your credit reports for up to seven years. How much they damage your credit score lessens each year, but it can still impact your overall credit score years afterward.

Your payment history is the most influential part of your credit score: a whopping 35%. In terms of credit repair, this means making all of your bill payments on time is important. If you have an auto loan that isn’t currently being reported – meaning your loan and on-time payments don’t show up on your credit report – the missed and late payments are likely to be reported anyway. Even auto lenders that don’t generally report their loans to the credit bureaus typically report missed/late payments.

If you think you’re about to miss a payment and you want to avoid hurting your credit, you have some options to explore.

Ask Your Lender for a Deferment

Lending institutions understand that times can get tough. If you think you’re about to miss a payment, contact your lender right away and ask what options are available to you. Keep your lender in the loop if you’re going through rough times – the sooner you get ahold of them the better.

This is especially true right now, given the current pandemic. Many borrowers left without work have been forced to find alternatives to making payments and needed assistance with their car loans and mortgages. There is a process that allows borrowers to take a breather and gather themselves, and it’s called a deferment.

A deferment, in a nutshell, pushes the pause button on your auto loan. Most times, lenders pause the car payments for up to three months and add those payments to the back of the loan term. If you qualify, you may be able to recenter yourself and get back on track. After the deferment is up, the car payments resume and you continue paying as normal.

The only downsides to this option are that your interest charges continue to accrue, and your loan term is extended. However, in the grand scheme of things, a few more months of a car payment and interest charges is better than default or multiple missed payments!

There is a common stumbling block to deferments though: most lenders don’t approve these plans unless your current on the loan. If you’ve already missed one payment or more, then the lender isn’t likely to approve it.

Is Refinancing Your Auto Loan an Option?

If you’re struggling to keep up with your current car loan, refinancing for a lower monthly payment could be the answer.

Refinancing involves replacing your current loan with another one, typically with a different lender. Most borrowers refinance to lower their monthly payments by either lowering their interest rate or extending their loan term (sometimes both).

To refinance, you also need to be current on your auto loan. Most lenders that offer refinancing don’t consider borrowers with multiple missed/late payments on their car loan. Additionally, you generally need to meet these requirements for refinancing:

  • Must have equity in the car or the loan balance must be equal to the vehicle’s value
  • The car is under 10 years old with fewer than 100,000 miles
  • Your credit score has improved since the start of the loan

You may need to meet other requirements, depending on the lender you choose. Refinancing doesn’t typically require a “perfect” credit score, but you may need a good one to qualify.

Ready to Get a More Affordable Car?

If you’re struggling to make ends meet and worried about skipping payments, then it may be time to sell your car and get something more affordable. If you’re concerned that a poor credit score could get in the way of your next auto loan, then consider a subprime lender through a special finance dealership.

Subprime lenders are indirect lenders that are signed up with certain dealers. They assist borrowers in all sorts of unique credit circumstances, and they could help you get into a more affordable vehicle if you qualify.

Finding a subprime lender can be as simple as completing our free auto loan request form. Here at Auto Credit Express, we work to match borrowers to dealerships with bad credit lending resources in their local area, at no cost and with no obligation. Get started today!

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