Loans for people with poor credit rating justify the adage that ‘there is always a second chance in life’. These loans exactly provide you that in the guise of money to help you fight your bad credit which may be inflicted due to CCJ’s, IVA’s, arrears, insolvency, repayment defaults etc.
These are available in secured as well unsecured forms and opting for one is entirely your choice. Both types of loans are useful and practical for various reasons for many people. They offer advantages for people seeking lower interest rates while they try to rebuild their credit rating.
Impact of a Poor Credit Rating
A poor credit rating can happen to almost anyone. It just takes a few bad decisions, a bad situation or a loss of employment and next thing you know your credit rating has sunk into the basement and no one wants to lend you any money. A lot of lenders simply do not want to take the chance of lending you money with a poor credit rating only to find out that you cannot repay the loans.
Lenders who Will Provide Loans for Poor Credit Ratings
There are lenders who will provide loans for people with poor credit ratings which break the barriers for many people who are trying to improve their credit rating. Regardless of why you may need a loan, many people will want to focus on rebuilding their credit rating. The best way to do this is to focus on meeting your monthly payments and paying each and every payment on time each month until it is fully paid for.
Once fully repaid, the credit rating will improve slightly since you have shown that you have been responsible and repaid the loan on time. At the same time by eliminating a number of other debts and focusing on decreasing your total debt, your credit rating will improve even more.
Types of Loans for Bad Credit
A secured loan is usually desired by people who are looking for a low interest rate and have an asset that can be used as collateral for the loan. This is usually the equity in a home or sometimes a car. The lender will apply for a lien against the car or will register the loan against the home.
This allows them to sell the home or car to recover the loan in situations where the client is unable to repay the loan. There is a defined process to follow and the client has many opportunities to correct his situation if he or she is behind on payments.
Unsecured loans carry higher interest rates and do not require any security for the loan. Basically the lender is looking at your credit rating, your income level and your total debt level in making a decision to lend out money. Clients with poor credit ratings may have a more difficult time in obtaining these types of loans; however they are available and can break the barriers in terms of improving your overall credit rating.
Some lenders may charge more for unsecured loans for people with bad credit ratings. They do this because they perceive there is a greater risk of nonpayment and they wish to be compensated for this increased risk. Some lenders will also charge added fees for registering a secured and unsecured loan as well as processing fees.
Borrowers should determine what all the fees and interest rates are before they make a decision regarding taking out a loan when they have a bad credit rating. After all it is your money and you can manage it well when applying for a loan with a poor credit rating.