Bad credit loans can be good or bad, depending on how you use them. These alternate financing resources are easy to get but they come with hefty interest rates. This is a fact that no legitimate lender online would try to hide from you. That is why these online lenders continuously campaign for the responsible use of their bad credit loans or other similar services. These campaigns usually spring from the principle of smart ways of using bad credit loans.
1.Use Bad Credit Loans for Emergency Expenses
The first principle in the list of smart ways of using bad credit loans would be to use them on emergency expenses only. By emergency, that would refer to instances which would require the immediate availability of funds. Examples would include medical or dental fees.
If your medical or dental insurance company cannot cover the expenses incurred because of a simple checkup that got into an admission to the hospital or an emergency operation, then it’s nice to know that there are online lenders who can provide you with bad credit loans.
In line with this, online lenders advocate against the use of bad credit loans and other short term financial services to fund your wants. Going on vacation with loaned money is not smart. Similarly, buying gifts using bad credit loans isn’t smart too.
2.Only Borrow What You Can Pay Back
Another smart move to the use of bad credit loans wisely would be to only borrow what you can pay back. Remember that bad credit loans and other online loan services come with short terms – 30 days max. This means that you only have 30 days to prepare the money to pay for the loan you took (principal amount plus interest).
To create a safety net for you and your lender, there is a 35% rule legitimate financing companies follow. Under the 35% rule, you are only allowed to borrow as much as 35% of your monthly salary. The 35% already includes the fees and interest rates.
3.Never Allow Roll-overs
Loan roll-overs could kill you financially. This is because they would increase the total amount that you need to pay back although you are not borrowing more. They basically mean extending the bad credit loans you took to another term, which further means that you will be subject to a new set of interest rates and fees.
Most online lenders would give you all the help you can get just to avoid roll-overs. Choose those lenders above all the rest.
If you use your bad credit loans wisely, you’ll never think twice of borrowing from credible lenders again.