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Credit For People With Bad Credit - Credit Guide for People with Bad Credit - Types of Credit for People with Bad Credit, Secured Loans, Payday Loans

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Having bad credit greatly reduces the chances of being able to take out any sort of loan. However, having a bad credit score does not completely eliminate the possibility of receiving a loan. Bad credit approval is possible, but with some severe limitations. The best way to explore what options are available to you is to look for bad credit loans online. Doing so, though, is a bit like walking through a minefield. Scammers and rip-off artists love to prey on people with bad credit. It becomes even easier for them when people with bad credit need money. This brings in an element of desperation that has people accepting or just overlooking terms that they would otherwise avoid. For this reason, treading the waters of an online bad credit loan must be done carefully or you will get snagged into a situation worse than the one you are already in.

Types of Credit for People with Bad Credit

If you have a low FICO score, which can be considered anything below 580, your options will be extremely limited for both regular and online loans. Bad credit is an automatic red flag to lenders that eliminates several avenues that are open to people with good credit.

When perusing the internet in search of online bad credit loans, you will be inundated with information proclaiming how easy it is to get a loan. It will seem as if lenders are practically throwing money at anyone who asks for it. Nothing could be further from the truth. Any bad credit loan online will fall into one of two categories: secured loans and payday loans.

Secured Loans

A Secured loan is one type of bad credit loan online that is available to many people. It is made available because it requires the borrower to put something of equal or greater value up as collateral. This means that the lender can seize the collateral should you fail to miss even one payment. Realistically, however, they usually wait until you have missed two or more payments before assuming possession of any collateral. By far, the most widely accepted form of collateral is your home or the equity you have built up on the home. This, of course, requires that you own a home, and if you are still paying the mortgage, that it has equity, meaning the value of the home is more than what you owe on the mortgage.

While home equity loans are the most common bad credit loans online, some lenders will accept other forms of collateral, such as automobile titles, jewelry, or other appraised valuables. Another type of secured bad credit loan online is in the form of a secured credit card. Lenders can issue a credit card to you if you send them cash to hold in an account that can be used to settle the account should in fall into default. Some lenders will give secured credit cards in amounts higher than the security you put up.

Payday Loans

The second type of online bad credit loan commonly available is the payday loan. Payday loans should be avoided except in the most urgent of emergencies. Payday loans are easy to get. They only require you to have a verifiable source of income and a checking account with a positive balance. Depending on your income and your relationship with the lender, you can take out up to $1000, but most people only qualify for $300 to $500. The loan is usually for a very short term, up to two weeks in length. The fee is from $30 to $150, depending on the amount of the loan. This seems reasonable at first, but when you look at it closer, this is an annual percentage rate of up to 1,000 percent. The APR of standard personal loans is usually around less than 20 percent.

Payday loans often cause people to become trapped in an endless loop of fees because borrowers discover that after they pay off the loan, they do not have enough money to get through to the next paycheck. To make ends meet they take out another payday loan, and the cycle continues indefinitely until the payday loan lender has taken thousands of dollars from you.

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