A Borrower's Guide to Poor Credit Loans in Michigan
Poor credit loans in Michigan (MI). FICO scores are used by the majority of lenders to determine a borrower's debt repayment habits and creditworthiness. If your credit score is low or simply doesn't exist, your chances of winning over a loan you've applied for will shrink significantly.
So, what options do you have if you're in need of a loan but have a less than stellar credit history? Continue reading and we'll tell you all about the bad credit loans in Michigan.
How is Your FICO Score Determined?
Your FICO score is based on your payment history. Think of it as being similar the way your GPA is an overall average of your grades in school.
When you apply for credit, lenders will usually use your score when deciding your interest rates. While other companies like employers, insurance firms, and landlords use your credit score to figure out how responsible you are.
Your credit score is determined by a few different factors. They are broken down and weighed as follows:
- Payment history 35%
- Total amount owed 30%
- New credit 10%
- Types of credit 10%
Because payment history shows whether you pay you bills on time, the most important factor in calculating your credit score is your credit history.
What Are Bad Credit Loans in Michigan?
Having bad credit doesn't mean you can never secure a loan in Michigan. It means that you have to understand that there are different options available that you can benefit from. This is where personal loans come in.
An unsecured personal loan is a loan that isn't ensured by collateral, meaning you won't have to use valuable items like your house as back up if you're unable to repay your debt. They do, however, tend to have higher than normal interest rates. But they can help you build your credit if you pay the balance back on time.
There are quite a few different types of personal loans you can choose from depending on your situation. Here are some options:
Credit Builder Loan
Credit builder loans aren't ideal if you have an emergency where you need money right away. This type of loan was designed to allow you to build trust with lenders while improving your credit score.
A lender will allow you to borrow a small amount of money that you aren't allowed to have right away. The money will be placed into a savings account while you make monthly payments just as you do with your credit card.
When the full amount of the loan is paid in full, you are able to pull the money from the account for personal use.
The lender will then report your payment history to the credit bureaus. Did you pay on time? Did you miss any payments?
These things will all go into account during the reporting process.
When you sign up for a payday loan, you won't have to submit any paperwork outside of a valid photo ID to prove that you're at least 18 years old. You will also need to provide proof of your income, and proof that you have an open checking account.
Due to the lack of background checking, payday loans are pretty easy to obtain without a high credit score.
The two most popular types of payday loans you will find are one-hour loans and cash advances. You can apply for either type through online lenders and large banks. Just make sure you are careful with online lenders as they can sometimes use hidden fees and less ethical practices to make their money back.
Payday loans are short-term loans where the due date is based on your pay schedule. It can be weekly, bi-weekly, or monthly.
The entire amount of your loan is due on the specified due date. If you are unable to pay in full, you can end up seeing high amounts of interest and late fees applied to the balance.
MI Signature Loan
You might see poor credit signature loans also called good faith or character loans in Michigan. You won't need to submit your personal information for a credit check with the majority of lenders.
However, this can vary, so make sure you read the fine print before applying for one. Most lenders will approve you for a signature loan if you have a co-signer.
You can complete an application for a signature loan from your computer within a few minutes. As the name implies, your signature is what locks you in for a signature loan.
Peer to Peer Loans
A peer to peer loan is a loan that you apply for online. You will find them on websites that link borrowers to lenders.
A borrower will post the amount they need on the website and lenders have the option to choose whether they want to give them the money. These loans are typically paid back in installments and have fairly high interest rates.
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Having bad credit doesn't have to hold you back from reaching your financial goals. There are options available where you don't have to deal with the anxiety of a credit check or another rejection from a bank.
Carefully review all your choices before choosing one of the options for bad credit loans in Michigan. This way you will secure the loan that works best for you.
For more articles on dealing with bad credit, follow our blog today.
Also See: Minnesota Poor Credit Loans