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What You Need to Know About Getting a Bad Credit Loan from a Direct Lender

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If you have poor credit, then you know how difficult it can be to get a loan. There are, however, many websites and services that offer bad credit loans from a direct lender. These loans can have pitfalls, though, so you need to do your research before signing anything.

Interest Rates

Loans for people with bad credit always have higher interest rates than those for people with good credit. This is just how the industry works. People with good credit are less of a risk in the lender’s eyes.

When someone has poor credit, there is a higher chance that they could end up defaulting on the loan, so the lender wants to make the most from their investment. This is no different than what you would expect from investing in high-risk stocks. There is a higher chance of losing your money, but also a chance of making more money.

Most bad credit loans have an interest rate between 20% and 36%, but this varies by the lender as well as the size and duration of the loan. The shorter the loan period, the lower you can expect your interest rate to be.

Be Careful With Low-Interest Offers

Low-interest offers can be a great way to take out a loan without having to pay upwards of 20% on your loan, but be careful with these offers. Be sure to read the entire agreement as most of these offers have a clause to address missed payments. In cases with low-interest offers, if you miss a payment, most lenders increase your interest rate to the standard amount and charge you retroactive interest on the entire loan.

If you miss a payment and your interest rate changes, you are expected to pay backed interest on the entire loan, not just what you still owe. This can lead to one missed payment adding hundreds of dollars in interest.

You should strongly consider low interest offers if you qualify for one, but always be sure you can make your payments.

Avoid No Credit Check Loans

While you pay more with a bad credit loan, you are still going to come out ahead of an unsecured no credit check loan. These loans can have APRs over 100%.

Do not confuse no credit check loans with payday loans. Payday loans are meant to be paid off in two weeks, not two years, so the high-interest rates are not as big of an issue. With a long term loan, however, you are always better off running a credit check.

How Can I Lower My Interest Rate From a Bad Credit Loan From a Direct Lender?

There are typically only two ways to lower your interest rate when getting a bad credit loan from a direct lender, find a cosigner, or put down more money up front.

If you are making a large purchase with your loan, such as a car, the more money you put down, the less you are borrowing, but it also shows the lender that you also have a vested financial interest in paying off the loan. The more money you put down up front, the more you stand to lose by defaulting.

The other option is to find a cosigner. A cosigner is simply someone with good credit who is willing to put their name on the loan as well. Since this means that if you default the cosigner is responsible for paying the loan, this method usually gets you a lower rate. How much lower depends on the cosigner’s credit as well as the lender.


Bad credit loans from a direct lender can be an excellent tool for people with bad credit but read the term and conditions. Be especially vigilant when it comes to low-interest offers as well as these can increase your interest rate if you miss a payment. If you need more information, you can visit Bonsai Finance to learn more about Bad Credit Loans and other personal financial services.

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