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
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
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
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
Poor credit loans can be taken up for different reasons like
*Auto loans and
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.
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