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If you are young and unestablished, you may have trouble qualifying for a loan at all because you simply have no history. Or maybe you have some dings on your credit report. You can still get a loan, you should just expect it to be a subprime personal loan.
What Is A Subprime Personal Loan?
Subprime personal loans are second-tier loan products for people who either don’t have a credit record or who have a history of problems paying. You may hear them referred to by a variety of terms, such as:
They tend to charge more interest than other loans, but this doesn’t mean they are bad loans. A good loan is one that helps you move your life forward by resolving a problem that would cost more to not fix than the loan costs.
So you can do some quick and dirty cost-benefit analysis to determine if fixing your problem makes more sense than not fixing it and decide for yourself what makes sense for you.
How Does Subprime Personal Loan Work?
Most of the time, the loans are not even offered in the legal name of the lender. The lenders simply issue promissory notes in their own name, and then they hire a broker who helps them to find and collect on defaults, in this case, in the form of income is paid by borrowers. The company will turn around and sell these notes to another source, such as a bank, for funding. Although some sources may say that personal loans are high-risk loans, for this reason, they do not come with high interest. Subprime personal loans do get you into trouble if you don’t get the money back when you get it due to death or other reasons that make you unable to pay back your loan.
The high interest rates of these loans are more than likely due to the fact that it is hard to get loans, so when you do, they want to make sure that the interest rates are high so they can get their money back. The companies want to be able to charge you more expensive rates because of your lower credit score.
Types Of Subprime Loans
There are four different types of subprime loans that are available. Each of these loans is designed to accommodate the financial needs of consumers with poor credit. Subprime personal loans are the most commonly used subprime loan type.
Subprime consumer loan: This type of lending is also known as a cash advance, payday loan, or “paycheck advance”. It is a short-term, high-interest-rate lending option that allows customers to borrow money for any purpose they choose. They usually have a repayment term of several months or less, which means they carry a higher interest rate than other types of personal loans.
Subprime auto loan: Auto loans are available at the dealership and through banks. Subprime auto loans are offered by big banks and credit unions and must be approved by the lender prior to approval.
Subprime mortgage loan: This type of subprime lending is available for residents who are looking to purchase a home. The availability of subprime mortgages is dwindling, but they are still out there. They can be obtained by having a co-borrower with great credit or through the Federal Housing Administration (FHA).
Subprime credit card: This type of loan is available to customers who have low credit scores. Subprime cards offer high-interest rates and features that are not offered on other types of cards, such as cashback rewards, perks, and insurance. Many of these cards still offer rewards for using them in certain categories or during specific months.
Benefits Of Subprime Lending
Personal loans are usually not the best option for most people. The interest rates are high, and the terms are usually short. They can be a good option for those with bad credit that need quick cash. However, these loans often carry high-interest rates, which can make them dangerous if you miss payments. For example, if you have bad credit and have needed money through a subprime loan to pay off an existing credit card balance or even help out with living expenses until your next paycheck comes in, you must pay back this loan on time so it is not affecting your overall credit score.
Considerations For Subprime Loans
The truth is that if you have good credit, there are other ways to get money. If you have bad credit, you may have to be careful about getting a loan in the first place, but you will find that there are plenty of options for getting borrowed money or lines of credit. Research is important when it comes to finding the best personal loan option available. If your credit score is not very high, it is likely that lenders are more likely to turn down additional loans simply because of your poor past history of paying back previous loans.
Getting a loan with a bad credit score is not impossible. If you have a low credit score and need money for an emergency, some loans may be the only option to get the money you need until a paycheck comes in. If you do get a personal loan with a poor credit score, it is best to pay it back quickly. This will prevent any additional damage to your credit score and improve your outlook on your financial history.
What Credit Score Is Needed For A Subprime Loan?
Before you consider a loan with a poor credit score, you need to understand what your goals are. If you want to pay off an existing credit card balance to improve your credit, then a subprime personal loan may be the best option to get rid of debt. If it is important for you to establish a good debt-to-income ratio, then it makes sense not to take out a loan where your payment obligations exceed your income.
The good news is that there are plenty of options for getting borrowed money and lines of credit, even if your credit isn’t perfect. The bad news is that these other options usually come with much higher interest rates and fees than other types of loans.
Where Can I Find A Subprime Personal Loan?
These days, the easiest way to find just about anything is via the internet. However, a generic internet search is not always the best means to find what you are looking for online. Everyone knows how frustrating those can be.
Instead, you should go through a loan matching service, like TheGuaranteedLoans. We keep a private database of information on vetted lenders and their loan products to help you find the loan you need. You fill out one form with us and when we find a match, we let the lender know who you are and how to contact you. Then you complete the application process directly with them.
What Kind Of Documentation Do I Need To Provide?
Subprime personal cash advances are usually for relatively small amounts of money with a short turnaround time. You don’t need much paperwork for them.
You do need to show you are a legal adult and a citizen or legal resident of the US. This can usually with a copy of a valid photo ID, such as:
- Driver’s license.
- State-issued ID card.
- Military ID card.
- Tribal ID card.
- College ID card.
You will also need proof of income, such as a recent pay stub or a recent bank statement. You may be able to get a PDF from your online account, making it easy to attach to an online loan application. Yes, the digital era of paperwork has arrived!
Conclusion
Making sure that you can pay back your debt can be difficult when you have bad credit, but there are ways to get around it. Getting a loan is not always easy, but it does not mean that there aren’t any out there for those who do have less than perfect scores.
Apply Now For A Subprime Personal Loan.
Take a few minutes to pull the information you need, then let TheGuaranteedLoans help you find the funds you need. We try to keep things simple and walk you through the process.
Are you ready? Then click the button below to get started on your application.
FAQ
No, it is actually legal to give out subprime loans as long as they meet the standards that the federal government has placed on them. Subprime loans are not illegal.
What is another name for subprime loans?
Another name for subprime loans is predatory lending.
The type of borrower that would qualify for a subprime loan would be an individual with bad credit, low income, and lower than average earnings. These borrowers may also have co-signers or other responsible parties who help make the loan possible.
Subprime lending causes many of the same problems as other forms of bad lending, including high-interest rates, high fees, and risky business. Additionally, subprime loans are not available to all potential borrowers, which means that certain people are excluded from receiving the loans they need to pay their bills.