Get $5,000 Loans With Bad Credit Following These Three Tips

When you have bad credit, getting a $5,000 loan may seem like an impossible task. However, there is a clear solution to your financial problems: the payday loan. This type of loan option has often been chided in the public, when in fact it is the most efficient way to get fast cash with bad credit. Through the use of a payday loan, you can have access to as little as $100 or as much as $5,000 simply, even with a bad credit score.

What’s the Deal with Payday Loans?

Many people look towards payday loans as bad. However, that is an undeserved reputation. In fact, payday loans are seen poorly not because of what they are, but because of who used them. Basically, people who could not repay the loans that they took out continued to use them, racking up huge interest and fees, and causing themselves to fall into financial ruin. This all lead to a bad reputation befalling payday lenders. However, payday loans, when used correctly, can actually be very useful tools for maintaining financial viability. The remainder of this article will review the proper use of this financial tool.

Tip #1: Pay Attention to Term

Payday loans, unlike traditional personal loans given by banks, are usually only offered for very short terms. They are meant to serve as a “payday” ahead of time, hence their name. Therefore, you need to be prepared to repay your entire loan, in full, by the designated date in your original agreement. Generally, this repayment will be required two to four weeks after being granted the loan. Failure to repay your loan on time will lead to massive fees that increase as time goes on.

Tip #2: Know Your Limits

Payday loans, also called cash advances, are to be used only for specific, emergency funds, not luxury purchases. They come with a higher interest rate than many traditional loans and a short repayment period. Therefore, you need to be certain that you will have the means to repay this loan and that you do not borrow more than you can afford.

Tip #3: Do Not Take Out More than One or Two Loans at a Time

The biggest mistake that many people make when using payday lenders is taking advantage of their “no credit check” promise to amass a large amount of cash. Basically, since payday loans are only for a small amount, these borrowers would take several out all at once to get a larger amount of money, say, $15,000 or more. Then, since they have too many obligations, the borrowers cannot make the payments for all of their loans and end up with more debt than they can handle.

Let’s take a look at a quick example. Using a conservative guess on numbers, consider that a $1,000 loan carries $170 for a processing fee and then $200 of interest. Therefore, a $1,000 loan actually costs you $1,370.

Likewise, a $5,000 loan will have a $350 processing fee, and $900 of interest. The $5,000 loan ends up costing you $6,250. Once you begin to add these loans together, taking two $5,000 loans and two $1,000 will get you $12,000, but cost you $15,240!

Clearly, in order to use a payday loan correctly you need to pay attention to more than how much money you get in your pocket immediately. Following these three tips will help you to use these loans to the best of your ability and avoid financial ruin. You can get a $5,000 with bad credit through a payday lender as long as you are responsible and smart.

Before Opting for a Personal Loan

By virtue of being an unsecured loan, personal loans have a very high rate of interest attached to it. So one should consider taking a personal loan only if:

You do not have an asset/security against which you can get a loan. For e.g. if you have an FD you can pledge, a secure loan might make more sense.
You have some visibility on your cash flows and are sure that you will be able to repay the EMIs (Equated Monthly Installments) in time. Else you are bound to enter into a debt trap.
There is an emergency and you need funds immediately. A personal loan can be taken because the processing time is much lesser on account of minimal documentation.

Opt for personal loans only to meet your essential needs which cannot wait. It should be your last resort. Taking it for satisfying leisure needs can prove to be costly i.e. for gambling, buying a new car (a car loan is a better bet with a lower interest) etc.

Before you choose your personal loan:

Calculate the cheapest loan offer: These loans come with very high interest rates ranging from 14% to 25%. Compare interest rates and get the complete picture by understanding the annualized interest rates for each offer. Then figure out the total amount of repayment you need to shell out with all the offers before opting for the loan of your choice.

Processing fee et al: You need to keep in mind the processing fee and other fees that will be levied when you apply for your personal loan.

Prepayment penalty check: Ask upfront if there would be any penalty payments for prepayment of the personal loan at any point in time. More often than not loan consumers tend to pay up their loans earlier than planned to be rid of debt. Hence, it’s important to know if your personal loan offer allows part prepayments. If that is the case, then you should be aware from what time frame in the loan period you can start prepaying and understand the cost you incur due to such prepayments in part or full.

EMI and tenure: Evaluate all loan offers. The first condition for loan offer selection is the total money outflow that the loan will cost. The second factor is the EMI. A loan offer with a lower EMI and a longer tenure may seem attractive, as it could be easy on your purse strings, however not all such loans prove to be cost effective in the long run. Hence, first calculate the total loan cost and then try to opt for a higher EMI, which you can comfortably manage to enable a shorter loan tenure.

Keeping track of your credit history: Especially in the case of unsecured loans, your credit history, which is recorded by CIBIL (Credit Bureau India Limited) plays a critical role in your loan application being accepted. A good repayment track record ensures an instant loan approval but brownie points in the form of more attractive interest rates.

Who is eligible for a personal loan?

The eligibility criteria and their specific details may differ from banks to bank based on their perception of the risks associated with such loans. However, nearly all banks divide the potential borrowers into three categories:

Salaried individuals
Self employed individuals
Self employed professionals

Other factors which are taken into consideration are, age, residence, work experience, repayment capacity, past obligations and place of work.

What documents are required for personal loans?

Personal loans require the least number of documents, making it the fastest to be approved. Typically, financial institutions would require proof of identity, residence, income and also 3 to 6 months of your bank statements. Some banks also require guarantors and the same set of their documents.

Alternatives to a personal loan

As indicated in the beginning of the article if you have access to investments that you can pledge, like shares, fixed deposits, gold, insurance policies etc. you can obtain a loan against them. The interest rates are lower compared to personal loan interest rates.