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Bad credit loans exist for people who, for whatever reason, do not have a ‘good’ credit score but still need access to loans. These borrowers need to be matched with lenders who will be able to provide funds even if the applicant has a bad credit history. Bad credit ratings can occur for a number of reasons such as late or missed payments on past or current credit agreements or unresolved County Court Judgement issues where unsettled debts were not nullified. As well as these cases, it may simply be the case that you have not previously taken out any credit and thus there is not sufficient evidence to prove that you would be trustworthy when issuing credit. It is necessary to build up a history of good credit over time to prove trustworthiness in making repayments.
Big Financial Institutions Staying Tough
Being accepted for a bad credit loan especially from a financial institution such as a credit card company or a bank can be tough. A prerequisite is often a good credit rating so applying for a bad credit loan can be especially tough. However, there are alternative lenders who may be more likely to approve you for credit such as guarantor loan lenders, payday loan lenders and instalment loan lenders who will consider approving by analysing each case individually rather than using a computer algorithm to filter applications.
Benefits Of Bad Credit Loans
One of the benefits of taking a bad credit loan is that you despite your bad credit score which would mean yo were turned away from larger institutions, you can still access the funds you need through alternative lenders. The credit loan you obtain despite your bad credit can help you with your particular situation be that an unexpected emergency expense or short term financial pitfalls such as bills or one-off costs. No matter what the reason for you having a bad credit score, this gives you a helpful option to get through tough situations.
By taking out a bad credit loan you can actually improve your credit record by making timely repayments. If you make your partial or full payments on time, as agreed, this will be positively reflected in your credit history as you will have held up to a credit agreement. This can actually be a good step in improving your credit record by proving your creditworthiness for future spending and borrowing- just be sure to make all of your agreed payments on time!
Negative Of A Bad Credit Loan
There are some disadvantages of taking out a bad credit loan. Due to the increased level of risk that the lender is taking, the interest rates on a bad credit loan tend to be higher than that of a typical loan for someone who has good credit. There is a higher risk that a bad credit borrower will default o repayments which is the reason for these increased interest rates. If you believe you can make the repayments in a timely manner then you can apply to one of the various providers but if not, then a bad credit loan may not be the right option for you.