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Good, Bad, And Ugly Credit Scores

When you’re in the market for borrowing money, if you have a good credit report, it’s like a green light for traditional lenders. These lenders will more than likely see you as a risk-free applicant capable of paying back the loan. On the other hand, a bad credit score is like a yellow light, causing the lender to possibly pump the breaks and take caution when offering you a loan. However, regardless of whether your credit score is flashing metaphorical green or yellow lights , there are lenders out there willing to work with those with both good and bad credit.

Borrowing with Good Credit

A good or excellent credit score is your ticket to low interest rates when you take out a loan, so the better your credit score, the better interest rates you’ll receive. This is because a good credit score reveals that you’ve most likely paid your bills on time, kept low credit card balances, and maintained a healthy mix of credit. These are all aspects that lender will look into when deciding whether you’re a good candidate for borrowing money.

In the case of a strong and positive credit history, lenders are more inclined to trust that you will make your payments on the loan, therefore they don’t tend to tack on expensive fees or high interest rates since you are a low risk.

Borrowing with Bad Credit

In contrast, if bankruptcy filings, unpaid tax liens, missed payments, and foreclosures litter your credit report, then you may not receive the best interest rates on your loan. You see, a bad credit score is a representation of your financial behavior, so if your score has seen better days, the lender may not trust that you’ll responsibly handle the loan.

So if your poor credit history deters a traditional lender from lending you money, what are your options?

When you truly need emergency cash to cover one of life’s emergencies, you could look into a bad credit lender. These lenders offer bad credit personal loans to those who don’t have the luxury of qualifying for a traditional loan. But because these lenders will work with you despite your risky financial past, they usually hike up the interest rates and charges to cover the risk factor. These extra charges act as a form of collateral in case you don’t repay the loan in a timely manner.

Borrowing in General

Regardless of whether you’re applying for a loan from a traditional or bad credit lender, there are a few things you should keep in mind before signing up.

First, consider the ways in which you plan on paying back the loan, work the loan repayment into your budget or search for ways to cut back on spending in the meanwhile. You can very quickly fall into a slippery slope of paying pricey interest rates and late fees on the loan if you are unable to pay it back in short order, so it’s best to determine a game play before applying.

Next you’ll want to read all of the terms and conditions of the loan. The lender should provide you with information regarding the price of the loan, fees, payment deadline, renewal conditions, and any repercussions should you not repay the loan. If any of this information is missing, find a different lender who will disclose all of these specifics.

Finally, if you have any questions regarding the loan, don’t hesitate to ask the lender, and don’t apply if you are unclear about any of the terms or conditions of the loan.

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