According to a survey by LendingTree, an estimated 74% of Americans with poor credit were unable to access a financial product in 2022 due to their credit scores. If you have a credit score below 670, you’re usually considered to have bad credit. As a result, you may have limited access to loans unless you explore loans for bad credit borrowers. However, you may wonder if bad credit loans are a safe option. If so, here’s what you need to know.
How to Tell If a Lender Is Safe
Usually, the best way to determine if a lender is safe for any type of financial product, including loans for bad credit, is to do some due diligence. Spend time researching the lender before submitting an application.
Often, a good starting point is the Better Business Bureau (BBB) website. Along with seeing the company’s rating, you can check out any reviews or filed complaints for additional information.
Other online resources are also worth exploring when you want to determine if a bad credit loan lender is safe. Google and Yelp reviews are worth checking out. Additionally, head to the company’s social media pages to look for comments indicating the lender’s quality. Performing searches on social media can also help you determine what people are saying about the company.
Next, spend time on the lender’s website. Make sure that clear contact information – such as addresses, email addresses, and phone numbers – is readily available to customers. Examine FAQs to see if the lender is up front about its products and any associated interest rates, fees, or similar costs.
Then, if you have further questions, reach out to the lender. Reputable lenders will typically offer straightforward answers that seem reasonable, so keep that in mind.
Common Scams to Watch For
While there are plenty of reliable lenders for bad credit loans, scams are also out there. If a lender guarantees that everyone who applies is approved, that’s a poor sign. Similarly, if a lender requires sensitive information – such as banking details or Social Security numbers – but doesn’t state it will run any type of credit check, that should give you pause.
Any unsolicited loan offers from companies you haven’t worked with in the past are another red flag of a potential scam. Not offering loan agreements in writing is also problematic, as are lender names that are highly similar to respected lenders but aren’t part of that organization.
Lenders that aren’t registered in your state can’t offer loans in your area, so a lack of appropriate registrations usually means it’s a scam. Asking you to wire money for processing fees or similar requests for upfront money is also a bad sign.
Tips for Evaluating Loans
When you’re considering a loan for bad credit, make sure to read the fine print. You want to understand all of the obligations disclosed in the agreement, including any fees or interest you’ll pay and whether there’s an early payoff penalty. Confirming whether the lender reports to all three credit bureaus is also wise, as those that do can help you build your credit history and improve your score across the board.
