As its name suggests, a bad credit loan is a special type of loan designed for those with a poor credit history. You might have a bad score rating due to many reasons, including failure to make credit card payments, having a County Court Judgment against your name, or failure to honor a previous credit agreement. Not only this, you could have a poor credit rating if financing institutions can’t access proof that substantiates you manage your borrowing successfully. As a result, mainstream lenders and traditional banks refrain from lending to people with a bad score rating. Fortunately, there are specialist loans available for such people with a not-so-perfect credit score.
Advantages of Bad Credit Loans
Loans for bad credit offer respite to people whose loan applications have been rejected by lenders, citing their poor credit history. The biggest advantage of such loans is that you can obtain the much-needed money that was otherwise not available to you. This means you can use the money to fund a purchase, consolidate debts, pay for an emergency, or improve your credit rating. Undoubtedly, bad credit loans prove to be a financial lifeline for such people. The best thing about such loans is that you can use them to demonstrate to credit rating agencies that you can manage money responsibly and make timely repayments. bad credit loans guaranteed approval
Unfortunately, such loans are available at high interest rates compared to some other types of loans, since lenders view people with a rugged credit record as risky to lend to.
Types of Bad Credit Loans
You may choose secured or unsecured loans.
Unsecured – The lender does not require the borrower to pledge a security or asset. This means the lender does not have any claim to your property even if you fail to keep up with repayments.
Secured – The lender requires you to pledge a property or asset as collateral to offer you a loan.
While a secured loan is available at a low interest rate, an unsecured bad score loan, with no security pledged as collateral, comes at a higher interest and restrictive terms. However, unsecured loans are still the most sought after due to their no-collateral requirements. This means you don’t need to risk your home or any other asset to obtain a loan. Since lenders can take possession of the collateral in the event of a loan default, secured loans are considered less risky for lenders and are available at very decent interest rates.
In most cases, you will need a co-signer with a good credit in order to get approved for unsecured bad credit loans. Another important thing to keep in mind about bad credit loans is that interest rates tend to be tiered depending on the borrowed amount.
Find the Right Loans
Despite the borrowing difficulties that those with a bad score report face, there is a plethora of borrowing options for such persons today. Do plenty of research to find the best loan that suits your needs. If you need a short-term payday loan, you are more likely to get approval from payday lenders. In case you need a long-term unsecured bad credit loan, consider non-bank lenders that specialize in such loans.