Bad Credit Loans

Written by Serena Berger
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So-called bad credit loans provide an essential financial service for people who don't have high credit ratings. There are any number of reasons that you might have bad credit, and many of them are not even your fault. For example, a college student or young person just starting work may have loans out already for his or her education, which makes banks shy away from giving more loans, even though you might need some start-up cash for the career which is ultimately going to enable you to pay back your college loans.

You can also be seen as a bad risk for a loan simply because you don't have any credit history at all. If you've never had a credit card on which you made regular payments and you're just starting a job, many banks think you're a risk, even if you're ultimately going to go on to have a great credit rating. For these reasons, bad credit loans should not necessarily have the stigma that some people think they do.

Build Better Credit with Bad Credit Loans

In fact, getting a couple of "bad credit loans" can ultimately help you qualify for good credit loans in the future. You can think of these loans as smaller scale versions of secured loans, which can help you build credit. With a secured loan, you have the amount of money in your account that you are borrowing, so the bank knows that you can pay it back. They charge you lower interest than you'd ever find on unsecured loans, and you build your credit rating by making consistent payments on the loan. If you had just spent the money, you wouldn't be doing anything for your credit rating, and you wouldn't have it in savings in case an emergency came up.

A short term cash advance, then, is a little like a secured loan. The lender knows that you can and will pay the loan back, and by doing so, you establish better credit. No one checks your credit rating in the meantime to find out if you have bad credit or no credit. Soon, you'll qualify for larger loans at lower interest rates, which is great if you're going to want to buy a car or put a down payment on a house.

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