There are ways to get a loan even with bad credit or unstable income. Some lenders offer emergency loans, payday loans, and bad-credit or no-credit-check loans to cater to borrowers who can’t get approved elsewhere.
Even though these loan products are relatively easy to access, they’re not worth taking and you should explore other options first. They can mean bad news for your finances in the long run.
Why an easy loan can cause risks
There are many benefits to taking out an easy loan. For one, it can give you the financial relief you need in a difficult situation. However, it is important to be aware of the potential drawbacks of these types of loans before signing on the dotted line.
Easy loans often come with high-interest rates and fees, which can add up to hundreds or even thousands of dollars over the life of the loan. Additionally, missed or late payments can damage your credit score, making it more difficult to borrow in the future.
For these reasons, it is important to consider all your options before taking out an easy loan. Traditional personal loans may be more difficult to obtain, but they typically have lower interest rates and fewer potential pitfalls.
Easiest loans and their risks
There are a few different types of loans you can take out when you’re in a bind and need money fast. You might consider an emergency loan, a payday loan, or a bad-credit or no-credit-check loan. While these loans are usually easy to get, each has risks.
Emergency loans
A loan can help you out when you’re in a bind. Whether it’s for car repairs or medical bills, emergency loans can give you the funds you need to get back on your feet. Lenders typically let you borrow $1,000 or more; some even deposit the funds into your account the same day you sign the loan agreement. The interest rate on these loans depends on several factors your credit score, income, and debt-to-income ratio.
When taking out a loan, be prepared to pay interest at a rate of 5.99 to 35.99 percent. Your credit score will determine how high your interest rate is; generally, the lower your score, the higher the rate will be. In addition, most lenders charge origination fees, which are usually 1 to 8 percent of the loan amount.
Risks: Even with a good to excellent credit score, you may still end up with a loan that has high-interest rates and fees. This is because lenders take into account many factors when considering a loan, not just your credit score.
Payday loans
Payday loans are a type of loan that is designed to be paid back within a short amount of time, usually your next pay period or within two weeks. These types of loans are easy to get because most lenders do not check your credit. However, they come with some serious drawbacks, such as high-interest rates and fees.
For example, the average interest rate on a 14-day, $300 payday loan can be more than 650 percent in some states. And, if you cannot repay the loan by the due date, you may incur what is called rollover fees (assuming that Payday loan rollovers are allowed in your state).
Risks: Payday loans are often associated with high fees and exorbitant interest rates. As a result, they should only be used as a last resort when other options have been exhausted.
Bad credit or no-credit-check loans
Bad credit loans are designed for borrowers who have poor credit or little to no credit history. Although credit score requirements vary by lender, most will require at least580. However, for those who don’t meet the minimum credit score requirement, there is the option of applying for no-credit-check loans. The downside to these types of loans is that they often come with high APRs and fees, similar to payday loans.
Risks: Having a low credit score can be costly, as you may be charged high-interest rates and fees by some personal loan lenders. Some lenders have maximum interest rates as high as 35.99 percent.
Alternatives to easy loans
There are a few things you can do to avoid the borrowing costs associated with loans. One option is to look into alternatives to loans. Another option is to improve your credit score.
Local banks and credit unions
There are many benefits to taking out a personal loan from a local bank or credit union. For one, you may qualify for better rates and terms than you would from a large, national institution. Plus, you can build up a relationship with your local bank or credit union, which can be helpful down the line. For example, PenFed Credit Union offers personal loans with no origination fees and APRs as low as 7.74 percent.
Local charities and nonprofits
There are some assistance programs available to those in need. Your local chamber of commerce or library can provide information on what is available in your area. You may also qualify for federal or state rental or food assistance programs based on your income level. The U.S. Department of Housing and Urban Development offers a database where you can search for rental assistance programs in your area.
Payment plans
There are other options available to you besides taking out a loan to pay your bills. You can set up a payment plan with the company if you owe money. This option may have additional fees or interest attached, but it will be less expensive than getting a loan. You also won’t have to go through a formal application or credit check process.
Paycheck advances
Instead of borrowing money from a lender and having to pay interest and fees, you can ask your employer for a paycheck advance. This way, you’ll be borrowing from yourself and won’t have to worry about debt.
Loan or hardship distribution from your 401(k) plan
There are a few things to consider before asking for a 401(k) loan or hardship assistance from your employer. These include whether you need more money than you could get with a paycheck advance and whether your employer offers this type of assistance. There is no credit check required, and in most cases, the funds can be accessed quickly. However, keep in mind that you will have to pay interest on the loan amount, even though you are borrowing from yourself. The funds are deposited back into your retirement account but on a post-tax basis.
Borrow money from family or friends
One way to avoid paying high-interest rates on a loan is to borrow money from a friend or family member. This option can be more flexible than going through a formal loan process, and the person loaning you the money may not charge interest. Get the terms of the easy loan agreement in writing and be sure to repay the loan as agreed upon to maintain a good relationship with the lender.
Bottom line
When you are considering taking out an easy loan, it is important to explore all of your options and choose the one that makes the most financial sense. Take some time to research each option and compare the benefits and drawbacks to make the best decision for your situation.
Doing this can help you get the best terms and pay the least amount of interest possible. However, sometimes taking out an emergency loan is your only option to access cash quickly. In this case, you can prequalify for a personal loan from multiple lenders to compare rates, fees, and terms. Another option is to contact a credit union or bank that you are a member of to see if you qualify for a personal loan. It is also important to assess your spending plan and only borrow what you can afford to repay promptly.
Frequently asked questions
How long does it take to get the easy loan funds?
Lenders come in all shapes and sizes. Some offer quick funding, especially from online lenders. You may be able to get your money through direct deposit within a few business days, or even within 24 hours of applying.
Do I need any documents to apply for an easy loan?
When applying for an easy loan, you will likely need to submit some documentation. This can include an ID like a driver’s license or passport that proves your identity, pay stubs, and tax forms that show your financial situation.
What can I do to secure an easy loan with better terms?
A good credit score is essential for securing a low-rate loan with favorable terms. You can improve your credit score by paying your bills on time, reducing your debt levels, limiting new account applications, and disputing any errors or inaccuracies on your credit reports.
