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Second Chance Installment Loans: A Ray of Hope for Less-Than-Perfect Credit

June 19, 2020 by Daniel Azzoli

woman smiling at second chance installment loans

Let’s talk about the elephant in the room: bad credit. Sometimes, it may stand in the way of being qualified for a loan when you need it the most.

More than half (53 percent) of Americans have been rejected for a loan or credit card because of their credit.[1] It’s statistics like this that may make you wonder if you would qualify for a loan with bad credit in an emergency.

If your credit score has been the reason why you’ve been denied in the past, or if you’re just worried your credit is too low to be approved, second chance installment loans for bad credit may be an option.

 

Why May Credit Stand in Your Way the First Time?

A credit score is a three-digit number that represents how you’ve borrowed in the past. Do you pay your bills promptly and dip into revolving credit sparingly? Or do you miss due dates often and regularly carry a big balance on your credit cards?

The answers to these questions may impact what number you get. Where it falls on a scale of 300 to 850 helps some lenders decide if your creditworthiness, or how likely you are to pay back what you owe them.

Here’s a quick breakdown of the scores and their corresponding ratings:[2]

Rating

Score

Excellent

720–850

Good

690–719

Fair

630–689

Bad

300–629

 

The closer you get to 850 — the highest credit score possible — the more your creditworthiness increases.

But as you drop closer to 300, your ability to pay back what you owe on time may get called into question. Scores between 300 and 629 may make it difficult to qualify for mainstream credit.[3] They may even be the reason why lenders deny credit applications.

What Are Second Chance Installment Loans?

Second chance loans may be an option for people who may have faced some difficulties in qualifying for personal loans in the past. These loans could be used to cover unexpected emergency expenses or repairs.

woman holding green Post-It note with black smile in front of face

What’s a Second Chance Worth?

If credit is holding you back, there are few reasons why a second chance may be what you need. Here are some of the potential benefits to this option.

You Don’t Necessarily Need Good Credit

These types of financial products cater specifically to people with subprime credit.

Some lenders, such as second chance installment loans direct lenders may grant funds to borrowers who are typically considered too risky by other lenders.

If you have tried to get a loan to cover emergency expenses and have been denied, you may try your hand at second chance loans. They may also be an option if you know you have a few skeletons in your credit report that you think may prevent you from being approved for credit in the future.

You Don’t Need a Cosigner

Being qualified for a cosigner loan requires a friend or family member to vouch for you. It may be challenging to find someone who:

  1. has good credit themselves
  2. are willing to help you

If you have a low score, second chance installment loans don’t require a cosigner, so you may qualify on your own.

You Don’t Need Collateral

Backing your promise to repay your loan with collateral is another popular way to borrow without a prime score. Unfortunately, it requires owning a valuable asset that your lender accepts as collateral.

Second chance loans don’t require you to pledge collateral against your loan, so it may be an option if you don’t own eligible assets.

How Do Second Chance Installment Loans Work?

As installment loans, they give you a set amount of money all at once. This amount generally tends to be on the smaller side compared to other personal loans.

Whatever amount you receive, you’ll repay it (plus fees and/or interest) over multiple fixed payments. This just means you’ll generally make several payments in equal amounts over a predetermined time period.

This makes them different from some other short term loans, such as payday loans, since they are due back in one lump sum, usually by your next pay date.

Second chance installment loans spread out your repayments over a longer period of time, typically spanning several pay dates. Whether your due dates match up with these pay dates is up to your lender’s policies. But one thing is for sure, you’ll have more time to pay back what you owe.

What Are Second Chance Installment Loans Direct Lenders?

Second chance installment loans direct lenders are one kind of financial institution that offers these products.

Direct lenders work one-on-one with their borrowers to review, approve, and fund their loans. They won’t involve third-parties or brokers during the lending process.

By working directly with these lenders, such as direct lenders online, you may expect to communicate with the same company at every step — from applying and receiving your funds to paying them off and closing out your loan.

This comes with a few advantages.

  1. A convenient online platform. Direct lenders are often synonymous with online lenders. Online lenders digitize the borrowing experience, so you can apply from their website, receive your funds as a direct deposit, and repay your installment loans online. No need to visit a storefront during specific hours to apply, pick up a check, or pay off your loan!

 

  1. Fast access to funds. One of the perks of online loans is that they tend to work on a fast timeline. Automating applications, disbursement, and repayment helps to shave off time, so you may get money online and fast in an emergency.

man standing up near desk with laptop to shake hands with another person on the other side of desk

When Should You Use Second Chance Loans?

When it comes to your financial problems, second chance loans are short-term solutions. They’re better suited for minor yet urgent expenses and repairs you didn’t anticipate, especially when you don’t have enough savings to cover them.

Here are some reasons why you might consider using these loans:

  • Your car battery dies unexpectedly, and you need to fix your vehicle to get to work.
  • You cut yourself bad enough while cooking that you need to go to the clinic for stitches.
  • You need to call in a plumber after you realize leaking pipes are triggering costly utility bills you can’t afford.

Helpful though they may be in certain emergencies, they aren’t a one-size-fits-all answer. As short term loans, they aren’t here to help you solve long term financial problems. They’re a temporary stopgap when you run into unforeseen expenses that need to be dealt with right away. If you’re looking to increase your chances of getting approved in the future, the tips in this article may help.

Here are some examples of when not to use them:

  • You’re struggling to keep up with your regular bills, like rent or utilities.
  • You want to jet-set around the world, and you need a boost to afford a hotel.
  • You’re planning on buying a new car.

How Do You Qualify?

Generally, a credit check plays an important role in qualifying someone for the typical personal loan.[4] Lenders may perform this check to see how you’ve borrowed in the past to make an educated guess about how you’ll borrow in the future.

While second chance installment loans direct lenders may still perform a credit check, a poor score may not stop your application from being approved.

They may determine your creditworthiness in other ways. They may ask you to share financial information like your pay schedule, income, and debt load when you apply. This information helps them understand your cash flow.

Your cash flow may inform them of your current abilities to repay what you owe. This gives them a different perspective from a credit report that lists your past borrowing habits.

Finding an Option That Fits

If you’re tired of being denied because of your past credit mistakes, second chance loans may be a ray of hope in your borrowing options. But don’t let the shine of these loans blind you to the realities of borrowing money.

Before you apply for a loan, here are three tips to keep in mind.

right hand holding paper over desk near papers files looking at second chance loans

1. Understand the True Cost of Borrowing

Because second chance installment loans direct lenders take on an increased risk by granting you funds, they may set high interest and/or fee rates. These higher charges may add to your already full plate.

To make sure you can juggle a new loan and your financial obligations, always research these rates thoroughly. Doing a thorough research may help you find the available rates in your state.

2. Enter This Cost into A Budget

A budget is your spending plan which is meant to ensure that you have enough incoming cash to handle all your outgoing expenses.[5]

A budget will help you decide if you can handle the added cost of your loan according to the terms of your loan agreement.

Knowing your rates helps you to punch real numbers into your budget, rather than estimated costs. Using accurate numbers helps you avoid making a mistake here.

If second chance installment loans for bad credit are your only option in times of an emergency, use a budget to identify some bad spending habits that you may have developed over time. If you’re able to adjust your spending, you may set aside more cash for sayings and for paying off debt.

3. Read Your Terms and Conditions

Once you whittle down your options to one loan, make sure you read your contract carefully. This document contains all the important details of your loan, including your payment amounts and their due dates. Reading these thoroughly will also help you look for any hidden fees or charges.

Loans offered through MoneyKey don’t have hidden fees, but wherever you get your funds from, reading your contract from top to bottom will help you confirm you’re in good hands.

Bottom Line

Bad credit often amounts to a brick wall in the financial world, causing your search for a loan to come to a screeching halt. Second chance loans may give you the lift you need to get over this barrier.

Available even if you have a subprime score, these loans may be an option if you’re facing unexpected emergency expenses. Just remember, second chance installment loans for bad credit aren’t your Financial Plan A. They’re only a possibility if other options have failed.

As you start exploring this kind of financial product, discover your options here at MoneyKey to round out your research. Get in touch if you have any questions. One Customer Care representative are always ready to help and discuss our products and/or services.

 


 

[1] https://www.studyfinds.org/53-of-americans-have-been-turned-down-for-loans-credit-cards-over-poor-credit/

[2] https://www.nerdwallet.com/blog/finance/credit-score-ranges-and-how-to-improve/

[3] https://www.experian.com/blogs/ask-experian/credit-education/score-basics/629-credit-score/

[4] https://www.thebalance.com/what-is-a-credit-check-4767514

[5] https://www.everydollar.com/blog/how-to-create-a-monthly-budget


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