Advantages and disadvantages of loans for people with bad credit

US-PDGOV

You are in a desperate need of immediate cash, which has made you run from pillar to post to get a loan. However, your credit history depicts you as a poor payer or a defaulter and being short of money you find yourself in the doldrums as you can see no escape from the emergency that you are in. 

If you have bad credit and need  loan you are not alone and there are many like you who find themselves in such a crisis. Thus, in view of such borrowers, many lenders in the financial marketplace have resorted to providing loans for people with bad credit. However, before you take the plunge to apply for a bad credit loan, take a look at the advantages and disadvantages of the same.

Advantages of bad credit loans

No issues with bad credit history- The best part of bad credit loans is that you need not worry about your past credit record since the lenders do not bother about such things. Instead, they look at the capacity of the applicants to repay the loan in future, unlike conventional methods of lending where the past financial record forms one of the main factors on the basis of which a loan may be out rightly rejected.

Fast approval- While personal loans applied in the conventional methods are hard to get approved; approval rates for bad credit loans are much higher ranging from 80 to 90 per cent.

Building credit score- Even if you have had issues with your credit score before on grounds of being a defaulter in repaying the dues, obtaining a bad credit loan gives you the opportunity to re-build the same. By timely and regular repayment of the loan amount, you can improve your credit score, thereby building a strong financial standing.

Large amounts- Bad credit loans also have the advantage of lending you higher amounts in a short span of time, although higher the amount, higher will be the interest that you have to pay.

Disadvantages of bad credit loans:

High interest rates- Lenders giving out loans to those having a bad credit history, in lieu of the high rate of approval and fast unsecured personal loan, charge rates of interests which are much higher than the normal ones. This is a sort of security, with which the lenders arm themselves in exchange for giving out bad credit loans.

Unsecure provider- Since the system does not come with a guarantee, often people applying for bad credit loans fall into the trap of going for the wrong lender.

Finally, if you apply for loans for people with bad credit, you need to be sure of being able to repay it timely to avoid being entangled into a vicious cycle of debt.