Poor credit loans may seem like an enormous waste of money but for those with low credit scores, this may be the only available option during a financial crunch. One of the biggest differences between bad credit loans and ordinary loans is in the annual percentage rate or APR. Loans taken by those with poor credit scores have a high annual percentage rate making it more expensive in the long run.
Since the APR is high for poor credit loans, it is important that you learn how to make or get the most out of your money. Even though you have to pay a higher amount as interest, there are certain tips which will help you tweak the situation to your advantage. The first tip is to try and increase your credit scores. Though you may have started out with a poor credit, a timely loan repayment means an improvement in your credit score. Hence if you have taken a five year bad credit loan and there are improvements in your score, then you can apply for another loan with a lesser APR. Use the second one to pay off the first one so that now you only need to pay a smaller amount as interest. This way, you may start off with a high APR and bad credit but turn it around to good credit with low APR.
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This way, you will also be able to lower the monthly payments which will in turn help you to meet expenses and maybe even save some money. Biweekly payments are another way by which you can turn bad credit loans to your advantage. For example; if you are making biweekly payments for one year, then twenty-six payments will have to be made in one year. This way, you will make two extra payments every year of the loan which means lesser interest in the long run. This is also a good way for shortening the period of the loan and paying it off faster. Though you may end up paying more every month, it can really help you decrease the amount of money that goes down the drain as interest percentage.
Dealing with poor credit loans may seem a trifle difficult in the beginning but it need not be so with a little bit of saving and planning on your behalf. Remember, the trick is to lower the interest paid as much as possible.
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