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Second Chance Loans – There is Always a Chance

 

You are not the first! Indeed, you’re not the first borrower to get rejected for a new credit card or bank loan. It’s a hurdle many borrowers face. People with good credit scores or sufficient earnings also get rejected. That’s because traditional lenders have very strict qualification criteria.

What should you do after getting rejected for a traditional bank loan? You could apply with a different bank, but this may cause you to accumulate several hard pulls on your credit file, which decreases your credit score. The best solution is finding a lender willing to overlook your poor credit score, income amount, etc.

Reasons why your credit card or bank loan was turned down

 

Your loan was deemed too risky.

 

The underwriting process allows traditional lenders to assess the borrower’s credit risk. It’s in the banks best interest to only offer loans that they are very certain will yield them profits. Laws have also been enacted following the subprime lending crisis of 2007 to control the risk appetite of banks.

Personal loans and credit cards carry high risk because they are unsecured. In case the borrower defaults, the lender doesn’t have an asset they can repossess or sell to recoup their investment.

Their only recourse is to seek the services of collection agencies. Some of these businesses have been known to coerce, harass or browbeat customers. You might receive many calls, have your family members informed of your outstanding loan, or have people knocking at your door demanding their money.

You have a high credit utilization ratio

 

It applies to credit cards, mostly. If you tend to max them out, the lender may see you in a negative light. It’s better to maintain a healthy utilization rate, and pay down balances before the end of the card’s billing cycle.

Inadequate employment history

 

Your job security is something lenders look at. If youre salaried, your paycheck is the source of funds to pay back the loan. Traditional lenders want to ensure that your job is dependable.

Some lenders require borrowers to have worked for a minimum of six to twelve months or two years in a particular field. It’s bad news for people who have just begun their careers.

Age of credit

 

Building credit is not a spontaneous process. It takes time to go through several credit cards or pay off your student loans before your scores are in the highs of 700+. While a lender might look for a long age of credit, it’s quite possible for someone with a short credit history to have scores higher than those of a seasoned borrower.

You’re credit hungry!

 

Having an excessive appetite for debt is equally detrimental. Lenders will check your credit report looking for the number of hard inquiries you have racked up in the recent past as far as two years. Too many hard pulls in a short period raise red flags because it implies that you’re in a financial mess and require any credit you can get to stay above water.

What are Second Chance Personal Loans?

 

Second chance personal loans are offered to borrowers turned down by other lending institutions. Interest rates on these loans are higher. That’s because borrowers who have been turned down elsewhere are deemed more of a credit risk. You might also encounter the term subprime loans, which essentially describes second chance loans.

Who can borrow second chance loans?

 

Anyone has the right to apply for this loan and receive an offer. However, the average applicant has a low credit score. How do you know if your score falls within the bad credit range?

The FICO scoring model is chiefly used by traditional lenders when assessing the credit risk of borrowers. The second most popular scoring model is the VantageScore.

Now, if your FICO score ranges from 630 to 679, it’s considered as fair or near-prime. Subprime borrowers have scores of 550 to 629. The other category of borrowers is those with scores of 300 to 549. They have likely faced major financial hiccups such as foreclosures or bankruptcy.

Second chance loans options

 

You can borrow second chance payday loans or personal loans. Most people opt for online personal loans after getting rejected for traditional bank loans. These loans are meant for individual use, unlike commercial loans or business loans. However, the lender doesn’t restrict how you use the funds once they are in your account. You can use your loan for:

  • Making big purchases
  • Funding home renovations
  • Paying tuition related expenses
  • Medical costs
  • Funding a relocation
  • Launching a new business

Features of a second chance personal loan

 

1) Installments

 

Second chance loans with bad credit are installment loans. That basically means that you repay the loan in consequent installments. The monthly payments are fixed since the loan has a fixed interest rate.

For instance: If you borrow a $5000 loan for a term of 4 years at an interest rate of 6%, you’ll pay equal monthly payments of $117.43 for 48 months. You can use an online loan calculator to calculate payments.

2) Less stringent requirements

 

Unlike the bank loan, you might have been denied, qualifying for online installment loans is quite easy. That’s because the requirements are less stringent.

You might only need an income of $750 or more, or a credit score of 500+. The lender will not ask for a lot of documents. Whats more, you don’t have to show up in person at the lender’s office.

Here is a summary of the loan terms:

 
Loan amount $500 to $35000. Bad credit loans normally offer up to $5,000.
Term 90 days to 60 months
Interest rate 6% to 36%

3. Long-term

 

Second chance loans can be long-term loans if they have a term of more than 12 months. If you’re just looking for some cash to last you until you receive your monthly wages, then consider a payday loan.

4. Loan amount

 

The amount you can borrow in most states with payday loans ranges from $500 to $1000. However, this loan option is prohibited in some states.

Go with installment loans if you need more cash. For instance, it’s quite easy to obtain a $5000 loan with bad credit if you meet the income requirements.

Advantages & disadvantages of second chance installment loans

 

1) Fixed interest rate

 

It becomes easy to plan for installments. For instance, knowing that you’ll pay $150 for 12 months is easier than having the installment amount reviewed every year as it is the case with variable-rate loans.

2) No security required

 

If something happens, and you cant keep up with the repayments, it’s vital to keep your car or assets away from the lender’s clutches. It could save you a lot of trouble than if you got your car repossessed or mortgage foreclosed.

3) Might be cheaper

 

If you have a stellar credit score and sufficient income but still got turned down for a credit card or bank loan, you might find an installment loan at a lower interest rate. Sometimes, online companies are cheaper because they have fewer overhead costs. They don’t need as much space as banks for their operations nor lots of staff.

4) Everything is online

 

Credit has never been accessible as it is now. You can thank the internet for this win. Your loan application takes seconds to reach the lender. With the advent of AI & algorithms, some lenders are processing loans much faster.

5) No restrictions

 

The money is yours to do as you please. With no spending limitations, you can find creative ways to use any leftover amount.

6) Poor credit is no issue

 

It gives a chance for the millions of Americans with low scores, limited credit, or no credit to access loans.

Drawbacks

 

Second chance loans will have higher interest rates. Though, the lender can reduce the rate if you choose to secure the loan with an asset. Some companies might offer discounted rates when you have a co-signer.

You might not get the amount advertised because of other factors such as your credit history. If a lender charges origination fees, they might be higher for borrowers with bad credit.

Common objections people raise before borrowing bad credit loans

1. “My credit scores will be affected.”

 

Your credit score will not be affected. Credit scores are influenced by several things, including how promptly you make loan repayments, credit utilization, credit mix, history of credit, etc.

When you take out any loan, it’s natural for scores to dip for a while. If the lender reports your on-time payments, the score improves until it’s where you need it to be.

2. “I don’t have cash for the down payment.”

 

Banks ask for down payments on mortgage loans. With most online loans, there is no down payment that needs to be paid. Be cautious when you encounter a lender asking for money upfront. It might be a scam.

3. “Online lenders are mostly scammers.”

 

That’s not true, in fact, lending is moving to the online sphere, making it convenient and fast. Credible online lenders also have physical addresses & offices. They are also licensed at the state level to provide loans. Genuine companies also belong to associations, such as the Online Lenders Alliance (OLA) or to the American Association of Private Lenders (AAPL)

4. “It sounds too good to be true.”

 

Most online loans might seem too good to be true. That’s because the credit score, income, and documentation requirements are fewer. It might also seem unbelievable to receive loans as fast as the same or next business day.

5. “I’m not earning enough money.”

 

Online lending companies cater especially to people with low incomes. You only need to be earning $750 per month to apply.

6. “I don’t have a job.”

 

Many bad credit or payday loan lenders do not discriminate against people earning a regular income from social security benefits, disability benefits, insurance annuities, etc. You just have to provide sufficient documentation of your earnings.

What are the eligibility criteria for second chance loans?

 

The basic qualifications include:

  1. Have a monthly income and proof of it: Unless the lender states that they offer no-fax loans, you’ll have to send them documents such as your pay stubs or bank statements.
  2. Be 18 years or older: In some states, the age of majority is either 19 or 21 years old.
  3. Checking account: Some lenders ask for void checks to set up ACH payments or postdated checks for the first installment. With a checking account, you can also receive electronic direct deposits.
  4. Contact information: You’ll need a working phone number and an email address. One of the lenders sales reps will get in touch with you after receiving your loan application.
  5. U.S. citizens or permanent residents with green cards: Lenders require your details to verify that you’re who you claim to be in your loan form.

You might be asked for additional documents, for instance, pay stubs, government-issued photo ID, bank statements, tax returns, etc. When you receive the request, you’ll scan and send the documents via secure email or fax.

Use Just Right Loans to Find Trusted Second Chance Lenders

 

Now that you have made it to the end of this article, finding lenders is the next logical step. You can find them in two ways. First, you may find suitable lenders by searching for them on the web, but it is not an efficient way to find a business that offers second chance loans.

The second way is to work with a loan matching service. At Just Right Installment Loans, we allow you to fill out one application. It’s then sent to short-term and long-term lenders in our network. Start by filling out the loan form on this page, and then click the “Get Started” button.

Frequently asked questions

 

1) How fast can I get the loan?

You can have your loan in less than 24 hours or the next business day.

2) Do I have to accept a loan offer?

You don’t have to take the first deal you get. Keep shopping for better terms. You can abandon the whole process without consequences.