You wish to own a loan, then it’s quiet, simple that there might be certain valid reason for that to be done. Years back the probability of acceptance of the loan application was not that sure, but then with the aim to make the lending easy, many relaxations have been done in the loan processing’s. Bad credit was a nightmare for the people applying for the loan as the chances of rejection is very high here. The main reflection behind the rejection of the loan application is because these borrowers are more likely to be a defaulter when it comes to payback the amount. However, with the boom in the Financial and technology market, the lenders have drafted many innovative ways to lend money to even such borrowers who were lagging behind because of their bad credit scores. Hence, loans for bad credit are no more a gluing factor now.
What is a bad credit loan?
A bad credit loan is a personal loan offered to those borrowers who have a weak, poor or no credit history on their part. These loans are generally of a high rate of interests as compared to that of the loan which is offered to the borrower with good credit scores. A FICO score below 630 is considered bad; one can easily access these scores online to check the status of their listing.
Types of bad credit loans
There are two basic types of bad credit loans based on the security –
- Unsecured bad credit loan – A 24 month loan for bad credit no guarantor is set out just to take borrowers sign on a contract with a promise to repay the loan amount as per the terms and conditions of the loan. In case they fail to repair their loan, the lender has the authority to owe the money back through any legal agency. Hence, these are termed as unsecured bad credit loans as it is lent without any guarantor or collateral. The best examples are – student loans, credit card and installment loans.
- Secured bad credit loans – A secured loan means that any valuable item from the borrowers end like a piece of jewelry, home or car is used as collateral to secure the amount. In case the borrower is unable to pay back the loan, the item held as collateral will be frozen from the lender’s side and also might sell to retrieve the loss incurred. In case, of poor credit holders, lenders feel safe when they lend secured loans to them as the lending is secured and the chances of going into loss decreases.
Points to remember when applying for a bad credit loan –
If you hold poor credit history, and are willing to move ahead with a loan, follow certain points for a better time ahead…..
- Check your ability to pay back
- Prefer a lender who performs a soft credit check, instead of a harsh or no credit check; as neither of these is good.
- Make your repayment plan when you are discussing the loan terms with your lender.
- Check whether your’ would be lender reports your credit report to the credit bureaus or not, as this help you in improving your credit scores.