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Loans Poor Credit History
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Poor Credit ratings can not hamper your loan requests.
Uncertainty is all-pervading in the different spheres of life whether it is social, emotional or financial. Uncertainty can result in ups and downs in the financial life of a person, and if you have been a victim of financial uncertainty in the past it might reflect in your credit rating as bad credit or poor credit.
The situation worsens further when youre desperately in need of a new loan and your past is blocking your path. A financial requirement may come head on and your funds may not be sufficient to meet up with the exigency, in such a situation you are inclined to look out for a new loan. Loans poor credit history are initiated by banks and other financial institutions to help out individuals during monetary crisis, while ensuring complete safety for the amount of money being lent. Before the lender grants a loan he normally develops a recovery plan to get back the loan amount along with profits in the form of interest. The income source for such lending institutions is interest charged on the loans and so they devise monthly payments to incorporate both a percentage of the principal amount and the interest on the loan. When borrowers fail to pay back the Loans poor credit history as per the terms and conditions these lenders report this as bad or poor credit to the credit rating agencies while adopting additional methods to recover their funds. Bad credit is not always a result of discrepancies in loan payments but can also be because of disproportionate debts, bankruptcy, late payment for bills and similar other evasions in financial matters. It makes perfect practical sense to pay off your loans as per the repayment plan or else your loan balance will grow to a monstrous size and you will end up paying much more. And of course alongside you would be causing serious damage to your credit rating which will affect your future prospects of getting financial help. The relevance and importance of credits scores: Before we step on to identify some of the loan options for people with Loans poor credit history, we will first try to understand what a credit report exactly means and what its relevance is. On a credit report people are assigned scores which classify them as being good or bad credit. If your credit is below 500 points you fall in the bad credit or the poor credit category, which means you have not behaved well with respect to the money borrowed in the past. While normally, all lenders have the recovery plan in place prior to granting of the loan, still very often this plan collapses for several different reasons like the financial situation of the borrower may have deteriorated from the time he took up the loan or the borrower may be in the habit of defaulting time and again. So to prevent such instances from reoccurring the lenders prefer to take a look at the past track record to see how trustworthy the borrower is. A credit report comes in as a handy tool for the lender to judge the borrowers behavior in
terms of handling finances. Everything is OK as long as the report is favorable but if it is negative then you are certified as being unreliable and the chances of your loan application getting approved are bleak. The credit scores on your credit report are awarded by FICO, and these numerals depict your attitude towards credit. As we mentioned earlier scores which fall below 500 points fall under the category of bad or poor credit. While 620 points and above are considered good credit, those between 620 points and 500 points are considered as somewhat imperfect scores. Most of the traditional lenders value credit ratings awarded by fico as the basis for reviewing loan applications. There are only a few lenders who consider loan applications from people with poor credit scores but to safeguard their own interest they impose strict terms and conditions along with higher rates of interest. Taking such loans can also help you in lifting your credit rating provided you ensure timely payments. Types of poor credit loans: With a bad credit score if youre planning on a traditional loan, then you are simply daydreaming because nearly all traditional lenders will not put their money at risk by lending to people with bad credit rating. The poor credit loans can be basically put into two categories: 1. Secured loans: every single lender tries to ensure the safety of his money and when they extend loans to people with bad credit they always take some fortified measures for the same. The benefit of this type of poor credit loan is that the borrower can get a good enough amount of money and moreover the rate of interest will be nominal. A secured loan calls for a collateral to be furnished by the borrower against which the loan amount is granted. Because the lender has something as a security against the loan, his money is at less risk and so he is able to offer better rates of interest. In case the borrower fails to repay the loan, the lender can sell off the collateral to cover up his losses. Realizing the threat of losing something valuable the borrower is also keen to pay back the loan as per the agreement. 2. Unsecured loans: unsecured loans for people with bad credit are seen as intensely risky situations by most lenders and so there would be very few lenders who would grant such loans. To get one such loan you need to make a lot of effort and be prepared to pay huge amounts of interest over the loan. Nevertheless in situations when a borrower has nothing to fall back upon, this may be the only way out to meet up with the financial crisis. Poor credit loans can be taken up for different reasons like *Debt consolidation *Home mortgage *Auto loans and *Personal loans. A Loans poor credit history can be taken up for almost anything, but what is vital is strategic planning for the repayment of the loan. Ensuring consistency in monthly payments will slowly get your financial situation heading back in the right direction. When picking up such loans be cautious and study the proposal and agreement in detail. Other Articles |
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