Bad credit loans are very popular as they are aimed at people with less-than-perfect credit ratings. Such kinds of loans are not available with recognised financial institutions like banks, but a large community with poor credit opens the door for private lenders to make money.
The most common features of these loans are they carry higher interest rates and typically fund unforeseen expenses. As your credit report is not impressive, you are highly likely to make a default. In order to mitigate the risk to be borne by a lender, interest rates charged are high.
However, interest rates may vary by lenders because of different processing fees, set-up fees, and monthly fees. You often have seen many lenders advertising legit money loans for bad credit in Ireland with varying amounts of lending and repayment terms.
Some do not offer more than €1,000, while others start by lending this amount. Some need to eliminate the debt in a lump sum, while others require paying it down in monthly instalments.
Various types of loans do not require collateral, including personal loans. People often do not get clarity if they are different or the same.
Bad credit loans are kind of personal loans
Bad credit loans are small emergency loans. They have been framed as such to help tide you over during an emergency. As they are not subject to collateral, they are also a kind of personal loan in Ireland.
Various other cash loans, like payday loans and doorstep loans, mainly aim to meet unforeseen expenses, but they are still different from bad credit loans.
A personal loan is a preferable choice among loan aspirants because of its all-around nature. One can use it for any financial purpose. Similarly, bad credit loans can also be used for any financial need or purpose. Lenders providing these online loans in Ireland do not mind if you use them for any genuine use.
Given below are some pointers describing the similarity between bad credit loans and personal loans.
- The lending amount may be larger
Other cash loans carry very small amounts of money. Often, the maximum amount that can be lent is up to €1,000. However, lenders usually impose a cap of €700. When it comes to bad credit loans, the lending amount may go up €3,000, depending on your needs.
These loans cover emergencies, including large unforeseen expenses. If you come across a significant expense like medical expenses, you will need to take out a bad credit loan. More than small loans like payday loans will be required to meet your needs.
- The repayment period may be longer
If the borrowing amount is less than €1,000, you may be asked to repay the debt lump sum on the due date. It may not be more than a month. However, some lenders may require to pay down the debt in weekly or bi-weekly instalments, depending on their policy. A majority of lenders, however, do not allow for this option.
If you borrow a large amount of debt, you will be asked to pay down the debt in fixed monthly instalments. The duration for the debt settlement may be three to six months, depending on the loan size.
Bad credit loans are not personal loans
Poor credit loans are not personal loans. Because they are not subject to collateral and, under some circumstances, they can be paid back in instalments, it does not mean they are personal loans.
- Products differ during the financial emergencies
Bad credit loans are emergency loans. They exclusively aim at funding unforeseen expenses. However, personal loans aim at funding planned expenses. Personal loans involve a large amount of money compared to bad credit loans. The lending amount for poor credit loans is not more than €3,000. However, in the case of personal loans, it could be up to €25,000.
- Expenses to cover can be a significant factor
Personal loans are meant for meeting large planned expenses such as weddings, car purchases, the down payment for your house, medical treatment, and the like. The repayment length of these loans may extend up to 18 months. However, in some cases, it may be more than that.
- The focus on credit scores may be different
One of the most common reasons why people take out a loan with a bad credit rating is that they want to do up their credit report. As a bad credit loan is generally repaid in a lump sum, it cannot help improve your credit score.
Personal loans can improve your credit score because you are supposed to repay the debt in fixed instalments over an extended repayment period. Since your financial situation may change during this time, sticking to the repayment plan shows that you survived financial ups and downs and gave priority to debt. As a result, your lender will inform credit reference agencies of your timely payments, and your credit score will increase automatically.
You can say that bad credit loans are personal loans as they also do not require collateral and, a few times, require you to make payments in instalments, but they are both different loans. The former is exclusively used when you meet emergency expenses, and the latter is used to fund significant planned expenditures.
Moreover, legit loans for bad credit in Ireland are more specific, and thus they have restricted users from applying for them. If we go with the name, we can see that most people with credit issues prefer bad credit loans.
On the other hand, personal loans are adaptable for most aspirants. It does not matter whether you have a poor credit score or not. You can go for these loans. It means if someone has an excellent credit score, they can also go for personal loans. In a nutshell, it is wise to know that being familiar with the difference or similarities between two loan products is vital before making any decision. Because you want to apply for a loan for some urgent reason, everything should be well analysed.