Personal loans for bad credit
What are personal loans
An individual needs personal loans for bad credit at various
stages in his life to satisfy his personal expenditure such
as getting a home, buying a new car, paying for education loans,
meeting traveling expenses, etc.
Many financial companies and banks offer personal loans to
such customers depending on the credit rating of the customer.
The banks and financial lenders evaluate the customers on a
variety of variable factors. Such a rating is called credit
rating of the customer. If the credit rating is good or is within
the acceptable range the customer gets the personal loan he
needs at attractive rates of interest.
Personal loans for bad credit:
If the credit rating of the customer is bad or is not within the acceptable
limits then the customer may find it difficult to source personal
loans. Today many banks and financial companies have started
providing individuals having bad credit with personal
loans for bad credit . Such loans are called personal loans
for bad credit.
Such bad credit personal loans naturally are disbursed at a higher level of interest rate than the normal personal loan given to an individual with good credit history. The extra interest rate is charged to compensate for the higher level of risk taken by the bank in providing the loan.
The credit rating of a customer depends on a variety of variable factors. It includes assets under his ownership, current job position, repayment of previous loans, income sources, default cases, timely payment of utility bills, etc.
Many state and federal governments have enacted the laws protecting the customer and ensuring specific guidelines for the credit industry. Also certain states have passed Uniform Credit Code regulating consumer credit.
The personal circumstances of an individual have to be presented well
so as to attract a good rating. It is essential to know about
an individuals credit score because the lender company relies
on such credit scores to decide whether it is good or bad credit.
It is legally the right of every individual to verify the rating
given to him by providing the necessary evidence. The rating
ultimately decides whether a credit is good or bad.
In the United States of America credit history of an individual is compiled and maintained by credit bureaus. An individual is evaluated by a statistical process and is assigned a three digit score. Such rating is well accepted across banks and financial companies and can be used to apply for loans.
Credit ratings are calculated from the financial history of the customer and his current assets and liabilities. A credit rating typically provides the possibility of the repayment of a loan as per the payment schedule and the probability of default. Here is a broad outline and a general view on how credit scores are read.
Credit score of 660 to 670 means an A+ to A- rating, implying excellent rating. It also implies that there has been no bankruptcy for the last 2 to 10 years and any defaults and credit problems in the last 2 to 5 years.
Credit score of 620 implies B+ to B- rating. It means that the individual had no bankruptcy for the last 2 to 4 years and no cases of bad credit in the last 60 days.
Credit rating of 580 implies C+ to C- rating. It reads as few delayed payments in the 30 to 90 days range. But it also implies that the individual is also discharged from bankruptcy since the last 1 to 2 years.
Credit score of 550 attracts a D+ to D- rating implying lots of missed payments but no bankruptcy since last 12 months.
Credit grade E implies a score of 520 or lower. It means that there have been many delayed payments in the last 30, 60, 90, 180 days loans and also that there is a possibility of the customer being currently bankrupt.
Credit score in the range of 500-550 implies bad credit.
Whenever an individual applies for a personal loan he is evaluated and accordingly
given a score depending on his credit factors. It is essential
that the customer provides accurate and updated information
to get the best rating and thereby save a lot of money on high
interest rates. Even a percent cut in interest rates due to
loans for bad credit factors can mean savings worth lakhs
over a period of time for individual investors.
Availability with loans:
Bad credit personal loans are available in the markets to suit a variety of needs. It includes first time home purchase, 2nd mortgage, 125 home equity, mortgage refinancing, home improvement, debt consolidation loan, secured personal loan, unsecured personal loan, line of credit, payday cash advance, unsecured credit cards, prepaid cash cards, bad credit auto loan, refinance loan, motorcycle loan, etc.
A secured personal
loans for bad credit , which is secured by collateral.
The collateral can be in the form of the borrowers mortgage
of his home, private assets including vehicles, certificate
of deposits, gold, etc. The value of the collateral may sometimes
exceed the amount of loan borrowed. In such cases of secured
loans, the interest rate is very low because the lender faces
very little default risk. In the event of actual default, the
lender has recourse to the pledged assets and can liquidate
them to get the borrowed money back.
An unsecured loan is a general loan wherein the customer offers no security against the loan borrowed. The lenders charge higher interest rates on such loans as they carry greater amount of default risk.
A payday loan is a bridge loan used to close the cash flow gap between paydays. It is a very short-term loan and is provided without a credit check. It is also called as check loan, payroll loan or cash advance. Such a loan is availed without credit support and thereby the customer can avoid defaults to pay off urgent bills. This will avoid negative rating or bad credit.
It is often advisable for individuals with bad credit to switch over to a consolidated loan. Consolidation of loan means bundling up of different loans of different amounts borrowed at varied interest rates into a lump sum package at a particular interest rate. This helps manage the loan repayment schedule in a much easier way. Also it is claimed that the monthly repayments go down as much as 60% due to consolidation of loans.
Considering the importance of good rating to borrow money, it is essential that an individual checks his rating and keeps it updated. In order to ensure good rating it is important that the customer pays off all recent bills. It also helps if the customer has not borrowed huge amounts of money in the recent past. The customer should be honest and should approach a few lenders with the updated credit rating to avail a personal loan.
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