Many people tend to think that credit score and credit history are immensely important when it comes to applying for a personal loan. In fact, traditional financial institutions pay close attention to FICO scores, since these figures control your access to, the pricing of, and the extensions of allowance.
According to one study carried out by Experian’s 2019, approximately 16% of the population in the United States has a score of less than 579 FICO, which is considered by lenders as someone with bad credit. More so, consumers who are part of this percentage usually find their credit options limited and more expensive because traditional banks see a low credit score as a risk that money will not be paid back.
That said, some lenders provide options for bad credit loans with instant approval. Instead of using a credit score as the main factor of acceptance of the loan, such providers primarily check an income level before deciding whether someone is eligible to qualify for the loan or not. Below, we will take a closer look at 5 steps that will improve your chances of approval for a short-term loan. Without further ado, let’s get started!
Step 1: Understand your State Laws
First and foremost, pay attention to the laws of your state to find out if the company is legitimate, how long it has been on the market, what the turnaround will look like, and how much you can borrow. A bit of research will help you to notice any distinctions between various payday loan laws and your lending provider, minimizing the risk of failed transactions and fake companies.
Step 2: Choose the Right Type of Loan
There are three main fast loan options borrowers can use to cover their unexpected expenses. All of them have at least one thing in common: they guarantee loans for bad credit with instant approval. That said, they also have different features, and it will be helpful to investigate each type separately to find the most appropriate option.
Payday Loans
These loans work as an advance on your salary and are smaller in amount. Also, they are short-term and need to be paid in full on your next payday Filld, which is typically between 7 and 30 days. Most lenders do not check high grades on this type of loan, so payday allowances are a good option for people with bad credit who need money for an emergency.
Here is what you can expect from a payday loan:
- maximum amount: $1,000
- maximum term: 1 month
- average annual interest: 150%
Example: you want to borrow $300 and need to pay $30 interest for one month. According to the given data, we can calculate your annual interest rate. For this, let’s divide $30 by $300, which gives 0.1, and multiply that by 365, which gives 36.5. Then, we need to divide the latter by 30 (since the loan is for one month), which gives 1.22, and multiply that by 100%, which gives 122%. So, we would have an APR of 122% for this particular example.
Loans Without Guarantee
Unlike payday loans, these are longer in term and larger in sum. Fixed monthly installments are paid accordingly and do not require you to put a collateral as a guarantee for the money to be approved. Thus, this type of allowance can be an ideal option for people who need more time to repay the debt and need higher loan amounts, but do not want to risk any valuables if they are unable to pay.
Here is what you can expect from an installment loan for bad credit instant approval:
- maximum amount: $5,000
- maximum term: 84 months
- average annual interest: 20%
Example: you want to borrow $5,000 and pay $1,000 interest for one year. Once again, we can calculate your annual interest rate according to the given data. For this, let’s divide $1,000 by $5,000, which gives 0.2, and multiply that by 100%, which gives 20%. So, we would have an APR of 20% for this particular example.
Loans With Guarantee
The biggest difference between these loans for bad credit instant approval is that they require you to put collateral as a guarantee of value to grant you the money.
This type of loan is riskier than loans without guarantee since if you stop paying your monthly charges, the lender can seize your security object and use the money from that to cover the loan it lended you.
Here is what you can expect from an installment loan for bad credit instant approval:
- maximum amount: $10,000
- maximum term: 84 months
- average annual interest: 7%
From the above, loans with a guarantee have lower interest rates since they are less risky for a lending provider. Other than that, they work like any other allowance. However, it is totally up to you whether to take the risk of giving a guarantee or not.
Step 3: Compare Lending Providers
It goes without saying that different loans, terms, rates, charges, and amount limits will affect the way your allowance works. It is crucial that when looking for a lender, you pay attention to what T&Cs the payday providers offer you when giving loans for bad credit, especially with instant approval. In that sense, you can eliminate some options that offer lower amounts than you need or charge hidden fees on your loan. Once that’s done, you can choose a site that fits your needs far more easily.
Step 4: Check all the Requirements
Before submitting an application and entering into the contract, it is important to read the lender’s requirements. Even though eligibility criteria vary from state to state and from lender to lender, most providers ask that borrowers meet the basic requirements, including the base legal age, proof of income, valid SSN, bank account, and proof of identity.
Step 5: Consider Alternative Options
Last but not least, it is crucial to understand that a payday allowance, like any other short-term credit, comes with a high interest rate and may get you caught in a debt cycle. Before you apply, consider the alternatives to a short-term loan. However, if you are sure that this option works for you, follow these steps above to ensure you get a great deal.
