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Unsecured Bad Credit Loans
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A few months back, I required some funds for a personal cause. I wanted to borrow money from the market. I approached some lenders and to my horror, I found that I had a bad credit score. I was in a dilemma. I required funds urgently but due to my bad credit, no one was too willing to give me the money. Also I did not have any collateral to place for a loan. It is then; when I first came across something called unsecured bad credit loans.
What is a bad credit
A bad credit tag is usually attached to you when you make default in your payments. A credit score is the parameter used to define whether you have a bad or good credit. It is a numerical figure calculated by financial organizations by evaluating an individuals performance with debts. The most popular kinds of credit scores are Transunion and Experian. A score below 500 is taken to be a bad score by lenders. On FICCO scale, a credit score of 720 is considered to be safe for giving loan while a score of 580 and less is taken as bad credit.
Bad credit loans can be of two types: Secured bad credit loans and unsecured bad credit loans. The first one allows you to attach your property as collateral and in turn, you might manage to get a lower interest rate on the loan. However, if you are not too comfortable with attaching any of your assets, then you can apply for unsecured bad credit loans.
What are Unsecured Bad Credit Loans:
unsecured bad credit loans are loans that are not secured by any kinds of assets (property or equity). Thus it becomes a very risky proposition for the lender. If the borrower attaches any collateral to the loan, the lender is sure to get back the money. Since the risk factor is high, the interest rates are bound to be higher for unsecured bad credit loans than it is for normal loans or maybe even secured bad credit loans.
However unsecured bad credit loans sure does have a lot of advantages:
• unsecured bad credit loans provide funds to people who are in dire needs of funds but are not able to get any loan due to their unfavorable credit history. It can also be provided to people who have filed for bankruptcy.
• unsecured bad credit loans can be used for whatever purpose the borrower thinks fit. It can be for wedding or educational purposes as well as for paying off bad debts. Also there is no limit on the amount that can be borrowed. It will depend on how much the lenders are willing to lend you.
• Unsecured bad credit loans helps people with bad credit history to improve on their credit
score by paying the installment dues in time. This way they can avail the best loan offers the next time.
The rate of interest for unsecured bad credit loans depends on various factors. The basic is credit score of the borrower. The lower the score, the higher the interest rate, as the risk involved is higher.
The second factor is the monthly income of the borrower. The rate of interest will depend on its stability.
The last but not the least factor is the loan amount:
The most appropriate thing to do is to procure the quotes from several lenders and then decide on the best option depending on the interest rates, payback tenure and so on.
Online Unsecured Bad Credit Loans
Ample lenders willing to give unsecured bad credit loans today flood the market. But for a fast and less hassled unsecured bad credit loans, online lenders are the best. The invention of Internet is a boon to the finance sector. It has a mutual advantage. You can surf through various websites and research the available moneylenders before you make a choice. You can apply for a loan on the net itself.
Online lenders have an advantage over traditional lenders. You can apply for unsecured bad credit loans in the comfort of your house.
Here is the process of applying for unsecured bad credit loans online:
You will require filling out an application form. Mostly it will be available at their website. You might require creating an account. For that you will be given an unique user name and password.
After you submit your application form, the lender will review your case and get back to you. They might call you or send you an email asking for more information. Whatever the case , they will be pretty fast in responding as the market has become very competitive.
Once this process is completed, the lender will send a representative to you for the relevant paperwork. You need to provide suitable documents and lo and behold, your unsecured bad credit loans are approved, in three easy and fast steps.
Disadvantages of Unsecured bad credit loans
Unsecured bad credit loans have got various advantages. But it also has its flip side. Now it is up to you to decide whether you can afford to overlook the following disadvantages.
• Usually the lenders are aware that the borrower is in dire straits and need the loan urgently. Thus it is easy for them to take advantage of the situation by charging a very high rate of interest. Now this might bring the borrower back to square one. It might lead to default in payments and thus further reduce his credit score.
• Another disadvantage of for unsecured bad credit loans can be that the lender can offer shorter repayment tenure. He might do this to recover his loan amount. But this can put the borrower in the same situation from where he started, as mentioned above, resulting in a lower credit score.
Unsecured bad credit loans can prove to be a very powerful instrument to enhance credit rating if properly used. You must not jump at the first offer you get. A little research can go a long way in saving a lot of money for you.
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