We’ve all heard the saying, “Sometimes bad things happen to good people” before. And when you’re someone with bad credit history in need of an emergency loan, although it can be trying to find one, this is a thought to definitely keep in mind.
An unexpected medical bill or car repair isn’t always something that we’re prepared to financially handle in advance and so sometimes loans are needed. Before you start your search, remember that bad credit is usually an indication of unpaid debt and so it’s pretty difficult to get approved for a traditional loan because they’re not interested in taking that kind of risk.
There are other options, though. Here are couple of them.
Payday loans. One of the more popular emergency loans is called a payday loan. Basically, it’s just like it sounds: You borrow money from a lending company (Ace, Cash Advance, National Cash Lenders and National Cash Advance are just a few of them) and you pay them back on your following payday. While they do work with people who have bad credit, aside from filling out a thorough application, be prepared to provide them with proof of employment, an unused check for the amount, a utility bill and a bank statement. Also be ready to pay interest. It varies based on the amount that you borrowed. Traditionally, your payday loan must be paid back either within 14 days or a month, based on how often you get paid by your employer; but the great thing is that upon approval, you can walk out with cash in hand the very day that you applied.
Logbook loans. Basically any loan that you apply for is going to want some form of collateral to insure that they will get their money back. In this case, a logbook loan (a British term) or a title loan is when you use your car as the security against the loan. If you own your car, or you are close to paying it off, you will usually qualify for a logbook loan. Just remember that they usually require your title before lending you any amount of cash. Yes, that’s a pretty big deal and so this is an option to consider if you need a large amount of money because they usually lend based on the Blue Book value of your vehicle. So, if you need $2000, it’s an option to consider; if it’s only $200, you should be cautious about considering this as your first choice.
Avoid future loans. Sometimes people are in so much of a hurry to get out of their current financial bind that they don’t realize that they have to not just payback the amount of the loan, but the interest that’s due as well. Based on the amount that you borrowed and the company that you borrowed it from, that can prove to be a bit hefty; therefore, it’s imperative that you only borrow what you can afford to pay back. But moving forward, one of the greatest lessons that you can take away from an emergency loan experience is to start up an emergency fund. Begin small by pulling out $25-50 every payday that is designated strictly for “rainy days”. And while you’re building up a savings account, also make a concerted effort to build back your credit. You can start by getting a copy of all three credit reports (Experian, TransUnion and Equifax), checking for any errors and then paying off your debts, one at a time, from least to greatest. This is one of the best ways to establish some financial security. After all, you only borrow money when you don’t have enough to begin with and by applying these tips, you are working to break that debt cycle.