In today’s world, there exists a wide disparity between the rich and the mediocre. Billions of people across the world are struggling to make ends meet and often end up applying for loans for fulfilling certain wishes and obligations. It is known that huge debts impact the credit score in a negative way. Expenses, if not tracked regularly, can lead to a shortage of funds and piling up of dues. Emergencies are unpredictable and require an immediate flow of funds. Expenses like medical bills, home renovation, and car repairs include a substantial amount of money and are also inevitable. A bad credit score can be due to defaulting on bills, which lower the credit score and minimizes the chances of future loan approvals.
It is a known fact that early repayment of loans saves a chunk of interest money. A loan is normally sanctioned at a high rate of interest resulting in the individual paying up a lot more than the principal amount through monthly installments. One can develop a good habit of paying extra installment every month for reducing the loan recovery period. The first step should be to calculate the total amount of savings incurred for early loan closure. One can use a loan calculator to input certain parameters to get an accurate report.
Extra payment of installments requires strict discipline and budget cutting. One can utilize online applications that track expenses and project monthly savings. The apps can also suggest ways to stay below the threshold by indicating cost-cutting areas.
It becomes exceeding difficult for individuals with bad credit score to obtain loans. For such a particular scenario, installment loans for bad credit may be the only option left. Another good way to reduce the burden is to save money throughout the year and make an extra installment payment. The money required to be saved can be obtained through discipline or from tax refunds if possible.
Biweekly payments are a good option for long-term benefits. Though biweekly payment does not immediately introduce abrupt changes in the monthly expenses, one can notice substantial savings over the years.
Individuals with a bad credit score that are looking for loans can apply for payday loans. The idea is designed to offer quick funds to individuals and the loans are temporary in nature. Having a low credit score is not a major criterion for payday loans. But the catch is that the loans are to be paid off by the next paycheck. If unable to pay off the debt, there exists certain provisions for extension of tenure which attracts additional charges.
Payday loans follow a simple application process that requires minimal documentation and fast processing of loans. An individual needs to provide details of qualifications, proof of age, and proof of a source of income, keeping in mind that the information will be cross-checked and no false details will be entertained followed by blacklisting. Online lenders demand basic info such as name, address, contact details and bank account details for smooth processing and sanction of loans. The time for approval of loan can range from minutes to a single business day with funds disbursed immediately after approval.
Though payday loans look like a savior, there are certain factors which are to be not overlooked. There exist some minor setbacks of availing payday loans due to their short-term nature and collection of no collateral. The first disadvantage is that the loan agreement normally involves the full settlement of the loan on the next payday. This can be a problem as there might not be sufficient funds left for utilities and other every-day expenses. The severe problem that can lead from this situation is getting into a debt loop. Paying off loans using the funds availed from another loan due to a shortage of savings is a deadly practice and also adds hefty extension fees. Considering the high risk involved, these loans should be availed only during an emergency and unavoidable situations, knowing that the loan amount can be settled next month positively.
A far better alternative to these types of loans include ideas that have flexible repayment options and less stringent approval criteria. The application process is easy and disbursement of funds is done almost immediately after approval.