In earlier times, taking a loan was considered a huge decision to make. The repayment for a bit of money was usually in exchange for extra hours of work, giving a years harvest to the moneylender and sometimes, if there was no other way of repayment- a marriage between the debtor’s daughter and the money lender. However, in today’s world, you can find almost everybody you know having atleast one loan to pay back.
A loan might have been for buying a car, financing a son’s college education or even paying back the mortgage. Although this means that you may never really have to go without money because of the availability of so much ready cash with its own clauses of course, there are always the chances that you may not be in a position to repay all your loans at the proper time.
Imagine a situation where you are in the midst of three to four loans and have defaulted on the payment of atleast two, due to a drop in the flow of steady income. Now you need a fifth loan. You may think you are not entitled to one, but actually you are. Moneylenders always look at a person’s credit history before giving out a loan to ascertain the risk involved in the same. The risk associated with giving a person who already has a bad credit history, a loan, is definitely greater but not impossible. Which is why such loans are called Bad Credit Loans? People who have arrears, who suffer from any kind of bankruptcy, have made late payments, who are involved in a court case or the other, or who have a poor credit score are all entitled to such a loan. The interest rates offered in such a situation are always competitive in nature and are decided after assessing your financial condition. It is of course kept in mind that besides this loan, you also have others to pay for. The good thing about applying for a bad credit loan is that it takes other factors such as your reliability, lifestyle etc into account, and not simply your credit history.
The first step to availing a bad credit loan is to know what your credit score is. A credit score is simply a rating that is given based on a careful assessment of your credit position or history. There are a few credit rating agencies that would be able to assist you in this matter. It is normally felt that a score of 680 and above means that you are a credible person who can avail of a larger loan and still pay it back in time. It is a score that falls below that number which puts you in the bracket of bad credit loan eligibility. Any moneylender would always look at the credit rating to assess the risk involved with giving a loan. Such loans are of two types. The first is called a secured loan and the second an unsecured loan. A secured loan means that you are taking a loan against some kind of valuable property which could be land, a house, a car or even jewelry. Getting a loan on some security is always easier as if there is any defaulting, the moneylender can simply seize the security. There is a slight risk involved for you, but if you are certain of repaying the money back, there shouldn’t be any problem. A secured loan could have a repayment of anywhere between three to twenty five years. In an unsecured loan, there is no security which is put up, and the loan is given in good faith that it will be repaid, although getting such a loan may be harder. A bad credit loan can be used for purchasing anything or can be utilized for anything, just like any other loan.
There are however, some conditions that any money lender will look at first before giving you a loan-
- The first is what kind of a security is you offering against the loan and what is the value.
- The second is your employment details, as in how long have you been employed, where are you employed and what is your income.
- Thirdly, your debt to income ratio is assessed. Remember that a bad credit loan is applied for when you have a few other loans already in your hand. Your ability to repay the money is looked at.
- Lastly, your recent credit history is also looked at. This is where your credit score comes in. Your basic expenses and time taken to repay them are noted.
Once you have gathered together these details, it is now time to go online and view your options. Remember to check out a few bad credit money lenders before you decide on one. Most sites have ready loan packages complete with the payment terms and interest rates, along with what kind of credit score would be eligible for it. Applying for a secured loan would entitle you to a loan with a lower interest rate as opposed to an unsecured loan. Then again, searching properly for various deals is important as interest rates might vary from one lender to another. Also, if the loan that you are applying for is lower than the value of the security being borrowed against, the collateral will only decrease. Some people, borrow money on such a loan to pump in some money for an existing business venture, or for starting a new one. In both cases, proof of the business and a clear business profile will need to be showed. Once you have decided who will be your money lender, you have to fill in an application form online. Once the site gets your details and request, most likely a customer service executive would be in touch with you to gather some more personal and financial details, pay you a visit and discuss the terms and conditions with you. Try meeting with a few lenders so that you can decide on the best deal for you. Getting a bad credit loan usually does not take more than a week or so but remember to read any contract you sign properly.
So, if you are already in too much debt, but still are in need of another loan for whatever purpose, a bad credit loan could always rescue you and give you hope to start again.