Things to Look Out For in Bad Credit Loans
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What are some things to avoid in bad credit loans?
For those that can only qualify for bad credit loans, there are several things you should look out for. Bad credit loans come with all sorts of contingencies and pitfalls that if you fall into are too hard for most to climb out of. Here are a few things to avoid when it comes to bad credit loans.
- Late Payment Increases – Lenders have gotten smarter in recent years. One of the ways that they have increased their potential earnings is by not foreclosing right away when bad credit loans go on with late or missed payments. Instead of foreclosure, many lenders now have steep rate increases that will be instituted in the event you are late or miss a payment. When you are comparing bad credit loans, stay away from these types of penalties if you have any chance of being late or missing payments. The best thing, of course, is to never be late on your loan.
- Prepayment Penalties – If you are having to look only at bad credit loans, chances are you have some debt issues as well. Your goal, therefore, should be to get yourself out of debt as quickly as you can. Prepayment penalties will not help you here. A prepayment penalty means that should you pay your loan balance off early, you could incur charges and fees. Avoid a prepayment penalty on any bad credit loans that you are thinking of taking on.
- Balloon Payments – Many bad credit loans look great on their face because the payments seem very low. This is often the case because the loan comes with a balloon payment at some point down the road. A balloon payment is just as it sounds, a HUGE payment that will include the remaining balance on your principal loan. Few people with bad credit loans can ever afford these payments, so stay clear if you can.
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