It can happen to anyone. One day you find yourself in a situation that requires funds that you don’t have. You may have bad credit scores and need money to pay expenses associated with getting a divorce, you may have a healthcare emergency, want to pay down your car loan, or simply need money to buy a bicycle. The reasons for needing a loan are as varied and unique as the people who need them.
If you have the option of borrowing money from a family member or friend, you may be better off with a private loan. You will not only avoid all the hassle of filling out the required paperwork, but you will likely be charged a lower interest rate and have more flexibility as far as making payments. However, it is recommended that even in these cases, you get the terms of the loan in writing and commit to making the payments in a timely manner to avoid damaging forever the relationship with the person that is doing you this huge favor.
If you need a loan to cover an unexpected expense, you might be thinking about getting an emergency loan, a payday loan, or a loan with no credit check. These options are usually easy to get, but you may not know the main differences between them. Let’s see.
Emergency loans are generally used to cover expenses that come up suddenly and for which you might not have the required funds. Most lenders will advance you a loan of $1,000 or more, and you may see the money deposited into your account the same day you sign the loan documents. The interest rate you will be charged for this type of loan will depend on your income, credit score, and debt-to-income ratio. If your credit score is less than stellar, the interest rates you will be charged will be quite high.
As their name implies, payday loans are short-term loans meant to be repaid by your next pay period. These loans have the characteristic that most lenders will not check your credit, making them very easy to get. Read the fine print before going for one of these loans since some of them may carry annual percentage rates as high as 400 percent and may also be accompanied by steep fees.
If you have a short credit history and cannot get a loan anywhere else, or if your credit score is on the low side, bad-credit loans may be for you. Still, your lender might require a minimum credit score of at least 580 to consider loaning you any money. If your credit score is lower, your option might be a no-credit-check loan. As with payday loans, these loans tend to carry very high-interest rates and fees. Again, read the fine print and ask pertinent questions before committing to accepting these loans.
In any case, be careful when getting a loan. Understand the terms associated with it and take the time to consider all available options to find a loan that fits your budget and your needs.