A bad-credit loan is a form of lending that caters specifically to consumers with less-than-stellar credit scores. These types of loans are relatively easy to apply for, with most lenders often issuing fast loan decisions as well as quick loan processing. On top of that, most bad-credit lenders don’t typically impose restrictions on how the approved funds can be used. 

As such, you can feel free to use the money on pretty much anything you need, e.g., debt consolidation, medical bills, travel expenses, car repairs, etc. There are also multiple types of online loans from CocoLoan that you can apply for, each with its own unique loan amounts, rates, terms, and conditions to consider.

These loans also typically come with fixed interest rates and repayment periods, which makes them easy to budget for. However, you also have to keep in mind that these loan products have a tendency to come with high interest rates since they pose a fair amount of risk to the lender.

In this respect, before you apply for an online loan, you need to take into consideration the various costs and risks that come with them in order to secure yourself the best possible deal.

What to Think About When Applying for an Online Loan?

There are a few important things to look for before you decide to sign on the dotted line when taking out an online loan. And while there are several factors to consider, there are essentially three main aspects that you should always remain conscious of:

#1. Low credit score equals high-interest rates

One of the most important things to remember about online loans is that applying with a less-than-ideal credit score means that you will likely be paying more than the average rate. 

This is because lenders look at your credit score to assess your level of creditworthiness. So, the lower your credit score, the higher the risk you pose of defaulting, which means paying a higher interest rate.

#2. There is a risk of dealing with predatory lenders 

Many consumers with poor credit scores are often the main targets of aggressive advertising campaigns that frequently promote low introductory interest rates. 

The problem with these loans is that they can often be misleading in that once the limited-time offer expires, the rates end up skyrocketing as high as 20–30%, which is significantly higher than what you would normally qualify for with a reputable lender. 

This is often why it is recommended that you only borrow money from CocoLoan and other similar credit broker sites, as they only ever work with legitimate and licensed online loan providers.

#3. Extra fees in the fine print

Since online loans have a tendency to come with high interest rates, it is more important than ever to ensure that you are fully aware of what you will be paying to secure the loan. This means reviewing the loan agreement in detail, as some online lenders may have add-on costs and fees hidden in the fine print that you may miss. Some of these can include; origination fees, prepayment fees, late payment fees, etc.

Where To Apply For A Loan With Bad Credit?

While it can often be a challenge to find a lender that is willing to provide you with funding when you have a history of bad credit, the good news is that it is still very possible. The real challenge is being able to choose the right lender, especially given that the online lending market is very saturated.

In this respect, as you start shopping around for a loan, there are a few important considerations that you can follow to help you select the right online loan provider.

#1. Research your lending options.

The first step that you need to take is to perform due diligence by looking beyond flashy websites or empty promises of easy funding. This means focusing on a transparent and trustworthy lender that can provide you with single-digit interest rates, long repayment terms, verified online security, and reliable customer service. 

This means scouring sites like Google+ or TrustPilot as well as checking reviews from reputable online publications. Alternatively, you can always use a credit broker service like CocoLoan to speed up the process, as they only work with legitimate lenders that can be relied on to provide fair and reasonable lending terms.

#2. Avoid “too-good-to-be-true” offers.

Legitimate lenders will usually offer loans with transparent and reasonable terms. So, while there are several online lenders out there that will advertise low rates, it is important that you don’t get lured into a bait-and-switch. This means never taking offers that sound too good to be true at face value. 

Most of the time, such offers come with a major catch, which is why you should take the time to review past client testimonials and reviews to ensure that you really are getting what you expect. Otherwise, you may end up finding the cost of your loan suddenly skyrocketing. 

#3. Focus on the loan APRs.

There are many unscrupulous online lenders that may attempt to promote their businesses with misleading pricing information. This often happens by obscuring their real pricing and only showing the “factor rate” or “cost rate.” This is often misleading because, while these rates can appear low, they are not all-inclusive of the loan’s interest rate, fees, and terms. 

What you need to be looking carefully at is the APR, because that is the all-in-one figure that will give you a full view of what you are getting involved in. It is for this reason that you should always be cautious of any lender that doesn’t provide you with an APR when asked.

#4. Review any extra fees and costs.

As mentioned before, most online loans tend to come with extra fees and costs to consider. And if you are not careful, there is a chance that you may find yourself on the hook for processing fees, origination fees, application fees, prepayment fees, and other costs. 

In this respect, you should take the time to be sure of how much money is going to be deposited into your account once these costs are taken into account. You should also ask about prepayment fees, as these will penalize you for simply paying off your loan too early.

Also, make sure to keep an eye out for lenders that offer to refinance your loan before the end of the term. This will only end up extending your loan period more than necessary, which will lead you to spend even more money in the long run.

Conclusion

Acquiring a loan with bad credit is often difficult, but with online lenders often being open to accepting bad credit borrowers, there are numerous opportunities for you to get the funding you need. However, it is vital that you conduct sufficient research and comparison shop to ensure that you are partnering with a legitimate lender.

This is also why it is often recommended that you use online lending sites like CocoLoan, as they can allow you to pre-qualify with multiple lenders online without negatively affecting your credit score in the process. As a result, you will also be able to guarantee that you are being provided with the best possible loan rate and terms so that you don’t find yourself stuck in a cycle of bad debt.