Loans for bad credit
Things happen, and you may suddenly be in a situation where you need to pay off an expense that just popped up. The money you expected from a job that you have completed long ago is delayed but you have an urgent bill to pay, such as the rent for a moving truck because your new job requires you to relocate.
In a perfect world, all you have to do is dip into your savings account. But the financial reality is many people do not have that benefit. What’s even more alarming is that you have employees and workers who often live from paycheck to paycheck. When an emergency or an extra expense comes up, they need to borrow – from friends, family, or the bank.
When there is no saving account to dip from and your credit cards are all maxed out, people try to get a loan. Unfortunately, a large percentage of the population has bad credit. Having bad credit and needing money badly places you in a difficult situation.
Why do we need loans for bad credit?
In the financial world, transactions are largely decided based on a person’s credit, and this is why we often hear people talking about their good or bad credit score. There is no clear definition of what good credit is. Different financial institutions give a person a different credit score based on their own set of criteria.
The same bank may give you a different score when applying for various financial products. Your credit score will be different when you apply for a mortgage compared to when you apply for a credit card or some type of guarantor loans. What is important is for you to get the highest credit score possible, which means that you are likely to get approved for the financial product you are applying for.
A higher credit score entitles you to better interest rates or better deals. A low score means that you have bad credit that will make it difficult for you to get approved for a financial product such as a loan unless it is a loans designed for bad credit.
Credit scores are classified into different bands as follows:
Guideline of Score Bands and their Rating
- 0-279 Very Poor
- 280-379 Poor
- 380-419 Fair
- 420-465 Good
- 466+ Excellent
While the bands indicate how good your credit score is, it only serves as a guide for financial institutions. There are people with very high credit scores but are still rejected for credit. Financial institutions have their own guidelines on how they extend credits, and there could be instances when you, even with a high credit score, will be denied a loan because you did not meet their other requirements.
Why is it so important to keep a good credit score for your loans
It is important that a person understand how to keep his credit score high. Number one on the list is how you manage your finances and debt. Your loans and debt payments are reported to the credit bureaus. You have to show the credit bureaus that you are responsible for the payment of your financial obligations. Some people wrongly think that good credit could be achieved by not borrowing. It is a wrong idea because the credit bureaus are looking at your financial history. If you do not borrow anything, your financial history will be blank. You can build your credit history by charging a small amount each month and always pay it in full. When this shows up in your credit report, you are proving that you can responsibly manage your credit.
Different type of Bad Credit Loans
If you are not able to create a credit history or if your credit history is quite bad that your credit score is very low, it will be difficult for you to apply for a loan from a bank or a credit union. However, there are financial institutions that offer personal loans to borrowers with poor, bad, or no credit. These type of personal loans are usually offered by payday loan companies, both storefront and online lenders, some banks, and credit unions.
Where do Bad Credit Loan rates come from?
Loans for Bad Credit are generally expensive because the lender charges higher interest rates. The same lender may grant a loan of the same amount at a much lower interest rate to borrowers with good credit. The interest rate charged to a borrower with poor, bad, or no credit is relatively higher than the normal interest rates because the lender is taking higher risks in extending his loans to you. If you have bad or no credit, it means that you have a history of paying your debts late or not paying at all. From the perspective of a lender, if you already have a history of late payment or non-payment of debts in the past, you may do the same thing to them.
The higher interest rates charged by lenders to borrowers with bad credit aims to compensate themselves for the risk that they will not be repaid. Remember that interest rate is the cost of borrowing money. The cost of borrowing money is higher for those who have a history of not paying back what they owed.
The lenders need to compensate themselves for the risk of extending his loans to borrowers with bad credit by charging higher interest rates. If 100 people with bad credit borrow money from a lender and 20 of them failed to pay the loan back, the lender has made enough money on the other 80 borrowers to cover the loss on the 20 that did not pay and still make a little profit. It is a different story when they lend to borrowers with good credit who paid back more often, hence there is no need to charge them as much.
A bad credit loan could either be unsecured or secured. In an unsecured bad credit loan, the borrower has to sign a contract with the promise of repaying the loan in accordance with the terms and conditions of the loan. Failure to repay the loan will cause the lender to pursue collection through a collection agency or legal mechanism, which will be costlier for the borrower.
Secured Bad Credit Loans and what is Security or Collateral?
A secured bad credit loan requires collateral (also known as security) such as a piece of jewelry, a car, or a home. The collateral secures the loan, which means that failure to repay the loan will allow the lender to confiscate the collateral as payment.In the unfortunate event that a person is in a situation that he is not able to continue the repayment on a secured loan, it might be an option to have a small loan to cover those expenses. This is especially ideal if you are expecting a settlement in the near future which will get you back on your feet. Just make sure to keep paying these repayments as it can easily get out of hand.
What are Payday Loans and how can they help you get by?
Payday loans are a type of secured loans. While you do not put up your car or house as collateral, you are securing your loans with a post-dated personal check. Failure to repay loans will cause the lender to cash your post-dated check.
How can Debt consolidation loans be useful?
A Debt consolidation loans are a type of service that binds the customer on a one fixed monthly fees contract in order to merge all pending loans into one.That means that an individual can choose to consolidate his bank account loan with his car lending and other pending loan with high rates. Usually this option is most common among middle age customers and if you agree you can sort out your financial circumstances in minutes. Just choose the day and provide your details as long as you agree to the terms.
Who are Paydayloansnow.co.uk and how can we help?
PaydayloansNow is a London-based loan introducer that will help you find a lender that will give you loans at the lower interest rate possible. They will help you apply for type of loans after completing a short online application. The company has a network of more than 50 lenders, increasing your chances of getting approved for a loan quickly and effortlessly. We are Authorised and regulated by the Financial Conduct Authority.