Debt is an ugly occurrence in life. There will come a time in when a person must go into debt because of a financial crisis wherein he or she will have no other choice but to look for help by taking a loan from a bank or a financial institution that loans money in your time of need. There is no way to predict when a financial crisis will occur. This is where personal loans come in handy, even if the person has had bad credit history wherein debt took a long time to pay, bad credit personal loans will give a person the necessary funding that person so desperately needs.
Banks and financial institutions nowadays are very strict about personal loans. This was brought about by the state of the country’s economy, wherein many lost their jobs and had to apply for bankruptcy. On other hand there were financial institutions that arose from the ashes of this economic disaster and provided people with bad credit history with the necessary loans and funding.
Types of Bad Credit Loans
There are 2 types of bad credit loans: the secured and unsecured. Secured bad credit loans are when the person borrowing money needs to put up collateral to secure the deal. Collateral is real estate, cars, jewelry, furniture and personal belongings that have value. This is the leverage that the loan company uses as a guarantee that the borrower pays back with an interest rate of 5% to 10 % which is lower than unsecured bad credit loans. Unsecured bad credit loans are the loans given to a borrower without the need of collateral and leverage for the borrower to pay. The rates, however, are much higher than secured bad credit loans.
Bad Credit Personal Loans Benefits
For people with bad credit history, bad credit loans offer the following benefits:
- Poor credit history is accepted
- Instant Help
- The Chance to Improve a Bad credit Score
There is a reason why it is called bad credit loans. It is simply being able to seek a loan even if a person has had a hard time repaying that loan or if it took longer for that person to settle a debt.
For people who apply for bad credit loans are most likely in dire need of funding. Bad credit loans offer these people the necessary funding and more than often do not have to wait for long periods of time to get that loan. Sometimes the loan gets approved after a few hours after application.
This is a chance for people who have bad credit reputation. In paying their debts at a timely fashion, people may improve their credit score as this erases some tarnish in people’s credit history. This is a chance for them to redeem their credit shortcomings as slowly but surely, they erase some of their bad history from their record. This will allow them to actually get loans from banks and financial institutions that are strict about personal loans.
Types of Bad Credit Secured Loan
There are a number of ways that person can secure a loan from bad credit loan companies. The first of which is a person in need of a loan must visit an institution that lends to people with bad credit. The person must then fill up an application to begin the process of getting a loan. It would also be a big help if that person had collateral such as a car, house, jewelry, electronic device, furniture that he or she could use as financial leverage in case failure to pay the debt occurs.
Disadvantages of Bad Credit Loans
There are a few disadvantages of bad credit loans. The first disadvantage is being the high interest rates that come with the loan, which are substantially greater than most banks. Financing agencies also do not simply hand out loans like candy. For a person to be able to secure a debt, that person must have steady income from a job or a personal business. It also becomes a financial risk due to the high interest rates which is in the 5 % to 10% range.
Another disadvantage is that some of these loan companies also have bad reputations for putting one over their customers. Most of the time these companies get away with putting one over their customers and the customers have no choice but to pay these loans. Some of them have hired people to collect for them and those people are far from pleasant so a risk is put on that person seeking a loan as well as those close to that person. It is always best to do research on loan companies so as not to risk anybody putting one over another.
Loan Repayment Terms
It is typical of loan companies to offer terms of payment for 1 month to 5 years for borrowers to be able to pay the debt. It is a better idea for the borrower to arrange for a shorter period of time to pay the debt. This is due to the debt becoming bigger through time because of the interest rates that come with it. It is also a better idea to pay as soon as possible because having a debt is never a good thing. In general, the repayment term of short term loans for $1000 – $1,500 is 30 days. However, most lenders will allow you to extend your loan by paying a fee.