If you have an emergency bill or cost that you can’t pay because a loan can’t be obtained, you likely need help. A 2nd chance loan might be the financial product that makes the most sense for you. In this article we will explain:
- What a 2nd chance loan is;
- How they work;
- The different types of 2nd chance loans;
- Things you need to know before getting one of these loans.
What is a 2nd chance Loan?
If you have poor credit or have been rejected for a loan before, second chance loans are structured to give nearly anyone an opportunity to get a loan. Because 2nd chance loans usually occur after typing to obtain other forms of loans or credit, they are often called 2nd chance or 2nd opportunity loans.
There are many instances when you might not obtain a loan on your first go:
- You were not credit worthy;
- You did not have a job or income;
- It was deemed that you would not pay back the loan in a timely or correct manner;
- You have debt or unpaid bills.
Almost always a 2nd chance loan is a short-term loan. This means that you will get money immediately but that you will need to pay this money back in a short amount of time (weeks or months).
These loans are great for people who need help covering today’s bills and who don’t get paid until next week or next month. Maybe you need food, goods or services, or temporary housing. A 2nd chance loan can help you finance these things.
The different types of 2nd Chance Loans
Several different forms of second chance loans are available. Each loan has a different name and different nuances. Think about what you want and need and what your financial aims are before securing this form of financing.
A short-term loan, which acts like a personal loan, is also a typical revolving loan. For a fixed period of months, you collect money from the loan and repay it. The repayment period is usually shorter than one year.
Typically, short-term loans are unsecured. This means that, like your car or watches, you should not have to set up collateral. If you don’t have physical assets (a car, home, computer, jewelry), a short-term loan is likely a useful tool for you.
Interest rates may be higher than on car loans or more conventional loans, but the expense of a short-term loan may also be significantly cheaper than the bills’ late payments or losing your assets (i.e. home, watch, car) theoretically.
A credit for your payday is a loan against your next paycheck. These loans are designed such that when you need money you can get paid prior to your paycheck arriving.
Sometimes, payday loans encourage you to get cash in before your paycheck arrives in your bank account. This acts as a cash advance in many respects.
There are two forms of advance loan for cash. The first acts almost just as a loan for payday. At a fixed date, you apply for the loan, get cash, and repay the whole loan.
There is a second option as well. As with a credit card, you will be able to carry out a cash advance and make payments in installments at later dates. You can pay a flat fee plus interest while you do this, before you pay off the balance.
However, your credit card issuer might not allow you to use this feature if your credit score is poor.
Bad Credit Installment Loan
Assets such as car loans, mortgages, and personal loans include poor credit installment loans. These function like conventional loans, but are tailored for individuals with credit that is less than ideal.
You will continue to pay additional funding fees, and it is possible that the interest rate will be higher.
With this kind of loan, your goal is to cover your financial emergency now, as you continue to construct your credit so that you can get a better loan in the future.