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Pros and Cons of Bad Credit Loans

Allison Martin
Written by Allison Martin

The moment the clock strikes five, you dart out the door, jump in your car and hit the highway for the long commute home. It’s Friday and you couldn’t be more excited about a night out on the town with friends. And although money’s tight, you’ve managed to scrape up a few bucks to enjoy yourself.

As you’re exiting the highway, your car begins to jolt and you hear a loud “pop”. There goes your tire, plans for the night and the little money you do have in your savings account.To add insult to injury, you learn that all four tires need to be replaced, along with one of your drive belts, or the car will soon be inoperable. Bummer.

But there’s an even bigger problem. You’re still $2,500 short and don’t qualify for in-store financing because you have blemished credit. So, you call the bank to ask for help and they tell you that your only option is a bad credit loan.

Should you take the cash or throw in the towel and catch public transportation?

If you’re in a similar situation, a bad credit loan may seem like a viable option. But before you sign your life away, here are some important factors to consider:

Pros of Bad Credit Loans

Despite the negative stigma that is associated with bad credit loans, there a few positives to consider:

Fast Cash

“I don’t mind tossing and turning at night trying to figure out how to cover a financial emergency,” said no person ever. But this could easily be you if life happens and you don’t qualify for a loan from a traditional lender. Or, you could apply for a bad credit loan and upon approval, have the cash directly deposited into your bank account in as little as one business day.

Rebuilds Credit

Most lenders will report account activity from bad credit loans to the credit bureaus. And if you make timely payments, your credit score could receive a slight boost since payment history accounts for 35 percent of your FICO score. Most importantly, paying on time will demonstrate to future creditors that you can responsibly manage your outstanding debt obligations.

About the author

Allison Martin

Allison Martin

Allison Martin is a digital content strategist and personal finance junkie. Her work has appeared on on a number of reputable sites, including The Wall Street Journal, Investopedia, Daily Finance, MSN Money and She also travels around the nation facilitating financial literacy workshops for nonprofits, governmental organizations, colleges and universities.


  • Ive been paying on my house for ten yrs. Little did i know because it was in house finance they dont report this to credit beauru. What can i do? I have no credit history since my husband died a yr after purchase. Wr were lied to at sale of home that in two yrs of paying we would have good credit

    • You can ask your lender to report to all 3 credit repositories. Hopefully they will agree to do so. If not, call Equifax and ask them how you can report it. Good luck.

    • One more thing. I have been told by a reliable source that they used a service called Self Lender and it raised their credit score quite a bit after making 12 consecutive on time monthly payments. You may want to investigate their service if you are wanting to build your scores.

  • How do I get my score raise up, does it take more than I new account to help me improve. And why are these cars still on my credit report saying I still owe but I do not have the vehicles.

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