Bad credit loans vs bad credit credit cards

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Bad credit loans vs bad credit credit cards

Deciding which option is best for you is a hard one, both offer pros and cons. Here is a breakdown of Bad Credit Loans vs Bad Credit Credit Cards.

 

What is a Bad Credit loan?

A bad credit loan is quite simply a loan for people with bad credit, these themselves are not a ‘bad’ thing. You may have missed a mortgage repayment or paid off your credit card bills, you may have failed an application to get credit and because of this some lenders think you may be too much of a risk to lend to.

Pros

* Anyone can apply for a bad credit loan if they are over the age of 18 and are employed

* You can use your house as collateral which could let you apply for a secured loan, this may mean you are offered a lowered rate

* These can be a good way to rebuild your credit score

* These loans are quick and easy to get, usually getting approved within a few days

 

Cons

* You must be careful if you do use your house as collateral – it is at risk if you cannot keep up your repayments

* These loans have very high interest rates

* If you want to take out a bad credit loan you must consider the processing fees, the interest rates and the penalty fees (late repayments)

 

 

What is a Bad Credit Credit card?

A Bad Credit Credit card is again not a ‘bad’ thing in itself, it is just a product aimed at those who have a poor credit history. Again you may have missed your credit card repayments or any other type of repayment and this has affected your credit score making lenders less willing to offer you a credit card or loan.

Pros

* These are great ways to rebuild your credit score if used correctly – paying off the balance of your card in full and on time

* If you use it correctly you could see an increase in your credit limit and a decrease in your interest rates – at this point it may be more worthwhile looking for a card with a mainstream bank because they offer low interest rates

* Credit cards are useful when buying items online because you still have the same protection if your item doesn’t show up, if it is faulty or if the retailer goes bust as any other credit card holder.

 

Cons

* Bad Credit Credit cards tend to offer a low credit limit

* They have very high interest rates and should not be used for long term borrowing

* Most Bad Credit Credit card companies do not have introductory offers on this type of card

 

Both of these are suitable for someone with bad credit but it is important that you consider what you will be using each for. If you need a long term solution maybe a Bad Credit loan is the best solution despite the high interest rates as they may offer you a higher credit limit compared to a Bad Credit Credit card. It is essential that you do research and fully understand the terms and conditions before signing anything, if you do miss a repayment it could significantly affect your credit score making it even harder to take out loans or credit cards.

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