Bad credit loans - ins and outs

From: Shakespeare Finance Ltd
Published: Thu Aug 12 2010

We all experience a time in our life when we are suddenly in front of unexpected expenses and we are not sure how to handle the situation. Especially, those with bad credit feel they are stuck because the majority of financial institutions would not approve their loan application as they have poor credit history. Potential lenders do check the credit history of a loan applicant before granting the loan amount. Particularly, in the case of unsecured or bad credit loans it becomes a necessity to carefully check the credentials of the borrower as there is no shield of collateral in these types of loans.

Remember, an unsecured bad credit loan comes with higher rate of interest and shorter repayment tenure. The main reason for charging high interest is the lack of credibility of the borrower as there is neither any security against the loan amount nor any good credit history, so the risk is much higher than normal lending. And as there is a saying, high risk means high profit. Therefore, to an extent lenders are justified when they charge higher rate of interest in these high risk loans.

Lenders are not very much concerned regarding the usage of borrowed amount. Most of the times, Poor credit loans are taken to satisfy different needs for example, to repay your previous loans, meeting house hold expenses, in order to pay the rent, to pay telephone or electricity bills, to pay medical bills, to pay school or education fees or to finance your summer holiday etc. You can do whatever you want with the loan amount.

You can also take bad credit loans under secured loans category provided you have home or some kind of valuable assets in your name to back the loan amount as a security. This loan will be cheaper in comparison of the unsecured bad credit loan as interest rate will be on the lower side. The repayment tenure, also, will be longer comparatively. Lenders are less worried about lending the money in this category as there are assets to repossess in case of default.

Before taking a final call, it is very important that you shop around and see the details and features of several different types of loans. If you research on different price comparison financial web portals, you will find that different lenders charge different fees for the same bad credit loan. In order to avail the best loan deal, take time and review every possible deal. This way you will not only save money, but also get the deal according to your pocket and requirements.

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