Loans On Bad Credit - Understanding the Scenario

People who have a credit score of less than 500 are deemed to have bad credit. Availing loans with a bad credit history is rather difficult. This is a guide explaining the scenario and factors affecting loans on bad credit.
| Saturday, December 06, 2008
People need financial assistance by way of loans for a variety of reasons. Some people choose to apply for loans so that they can buy a house while for others loans help them to pay off their education expenses. However financial assistance through loans for people with bad credit history is rather difficult. Whether an individual can get a loan and the amount of loan that he can get together with the interest rate and the payment details largely depends on the credit history of the concerned person. FICO score is the measuring bar that is used to evaluate the credit history of an individual and is basically his credit rating. While calculating the credit score a variety of factors are taken into consideration. These include whether the past bills are paid in time, the balance available on the loans and credit cards against the limits, recent credit applications and other facts. A FICO score of below 500 is considered to be poor and a person with that score can take benefit of bad credit loans.

Here are just a few points that would help you understand the whole scenario of applying for or getting approved on loans if you have a bad credit history:
  • Before opting for bad credit loans an individual needs to make an honest assessment of his current debt together with the extent of debt that he/she can possibly take and comfortably pay off. Current debt repayment schedule also needs to be kept in mind. Likewise the job security and whether he/she has a steady income also needs to be considered before benefit of bad credit loans can be taken.
  • An individual can easily obtain his/her credit score from Equifax, Experian and TransUnion which are the major credit bureaus. If you have a bad credit score then you can take benefit of bad credit loans offered by a large number of banks, online lenders, credit unions and other financial institutions.
  • To take benefit of loans on bad credit a person is required to first make an application to the lending authorities with requisite details. A loan officer then makes an analysis of the credit worthiness of the concerned person.
  • Private lenders are often willing to negotiate in terms of the loan packages available along with interest rates and payment schedules. Before applying for loan it is advisable for people to get information from different lending sources. This will allow individuals to select the most beneficial loan option. Also it is important to understand that the interest rates offered by private lenders are higher than those offered by traditional lending sources.
  • Likewise the interest rates quoted by private bad credit lenders may not necessarily be the rates at which you can avail loans. These rates advertised tend to be rather low. The rate at which a person can get a loan varies according to the details of each particular case.
  • A collateral security on the loan helps an individual to get benefit by way of negotiated and lowered interest rates and convenient payment schedules. The interest rates for secured loans are always lower than those for loans that are not secured by way of collateral. However before opting for bad credit loans it is advisable for people to ensure that they can stick to the payment schedule otherwise they can end up losing their property in the long run.
  • Many people often opt for bad credit personal loans since these loans tend to be unsecured. A decision to opt for such a loan should be carefully thought out. The greatest benefit of these loans is that the money can be used for a variety of purposes such as to undertake home renovation, to pay off past debts and as education loans among other purposes.
Subscribe to RSS Feed
Subscribe to RSS feed for Credit category.
Search Articles