Selecting And Securing A Bad Credit Loan
Many people who have low credit scores are unaware that securing a bad credit loan is an option, since so many loans are contingent on the borrower having a positive credit score. Loans for borrowers with low credit usually have higher penalties for defaulting and a higher interest rate, necessitating that the borrower pays them back more reliably to avoid further financial trouble. However, these loans are an ideal way for many candidates to build their credit scores through responsible borrowing that may not be possible through conventional loans. People who have trouble securing a regular loan are prime candidates for low credit loans, as are people with low credit scores who need to repair their score over time.
While there are pros and cons to taking out any loan with bad credit, balancing the positive aspects with the negatives can make it possible to select a loan that will benefit the borrower. Different types of loans come with different criteria and responsibilities, so many pros and cons are tied directly to the reason for the loan. However, the most important aspects are universal for all low credit loans. One of the biggest positive aspects of taking out a bad credit loan is that repaying it in a timely manner will help benefit the overall credit score, making it easier for a low score to recover. The biggest negative aspect is the higher interest rate and penalty for late payment or defaulting, which can crash a credit score that is already low. For this reason, it is important that the candidate ensures that they can make timely payments before applying for the loan.
Most bad credit loans are secured, which means that the borrower offers collateral of some type. Much like secured credit cards where the applicant makes a down payment that determines their credit limit, offering collateral in some form helps the lender justify offering a loan to the borrower. Bad credit auto loans may specify that the car being purchased with the loan remains in the legal possession of the lender until the loan is repaid, while bad credit payday loans reserve the right to garnish paychecks if the loan goes into default. Most bad credit personal loans use the contents of the borrower’s savings account as collateral. Home loans for bad credit will generally repossess the home if payments are completely neglected, and student loans for bad credit might cause the borrower to drop out of school if they do not make timely payments. All of these consequences can be avoided by understanding the terms of the loan and making an effort to meet all payment deadlines.
Most major banks offer different types of secured loans that include personal loans, small business loans and home equity loans.
Wells Fargo offers personal secured loans with a fixed rate that is specific to the borrower.
Bank of America offers secured loans for starting small businesses.
Chase offers home equity loans for potential homeowners that are easy to secure depending on the value of the home being purchased.
LendingTree is another good source for bad credit loans.
In most cases, a potential borrower will receive a decision on their application within hours, especially if they apply online during business hours. In some complicated cases, the decision may take several days or longer, but in most cases a 24 hour approval or faster with funds being deposited immediately is quite possible. In most cases a cash payout is unlikely, but may be more common at small local branches or lenders. Securing a bad credit loan is an ideal way to rebuild a sinking credit score for financially responsible borrowers, but it is important that the candidate fully understands the terms and is able to repay their loan in a timely manner.