Poor Credit Loans – Taking You In New Horizon

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Poor Credit Loans – Taking You In New Horizon

Poor credit loans are financial instruments just like many other types of loans. These instruments are of two types i.e., secured and unsecured. There are many lenders providing these financial instruments through online and offline systems as well as at your local bank. There are advantages to all types of financial instruments and it really depends on the perspective of the individual regarding which one is more important. These loans regardless of the type can help many consumers taking them to new horizons in their personal lives as well as their work and business lives. We will take a look at these types of instruments from a poor credit loan perspective and try to help readers to understand the relative advantages and disadvantages of each type of loan..

In general a poor credit rating makes it both more difficult to be approved for a loan and when you are approved for the loan the interest rate and terms may not be as competitive as many consumers would like. The interest rate tends to be a bit higher and the fees are also higher since the lender will perceive you as a higher credit risk due to your poor credit rating. They may be interested in why you have a poor credit rating and if it is for nonpayment of a previous loan for example, this sort of record can work against you. The cost of a poor credit loan can be managed by considering different types of loans and also comparison shopping for loans. We will discuss each of these in some more detail.

Unsecured Poor Credit Loans – these loans are personal loans that are only guaranteed by yourself. There is no other promise other than your personal word that you will repay the loan. In the event that you do not repay the loan, the lender will need to take you to court and have your wages garnisheed in an effort to recapture the loan. This is costly and time consuming and frankly no one really wants to go through this. Personal loan rates will be higher as a result to reflect this increased risk and the increased cost of doing business.

Sometimes the borrower will be asked to have someone else guarantee the loan. This could be a friend or a relative. In situations such as this, the cosigner is agreeing to repay the loan on your behalf in the event that you are unable to repay the loan. Most people are not willing to repay the loan since it is too risky for them and they do not want to take the chance of getting stuck with the loan. Many parents will help their kids in situations like this by cosigning for a loan since their children are usually a good risk, but do not have a good credit rating  due to the fact they may be applying for their first loan. Even in these situations parents need to understand that they are agreeing to repay the loan in full if for some reason their child cannot repay the loan. This is a serious and big responsibility.

Secured Poor Credit Loans – these loans are secured by some equity that you may have, usually a home, or car that has residual value. In case you do not repay your loan, the car or the house can be sold by the lender to recover his loan and the costs associated with selling your car or home. This is a very expensive ramification of not paying off a loan and most people would much rather find the money to repay the loan vs. losing their car or home. Rates for secured loans are generally a bit lower to reflect the reduced risk associated with loans of this type.

If your credit is bad, obtaining a secured loan can really reduce the amount of interest you are obligated to pay. Lenders will also accept cosigners as well in situations like this.

Offline Poor Credit Loans – are processed by the banks and other lending institutions. Typically a customer needs to make an appointment with a loans officer and then provide all of the appropriate information to the lender for review. Borrowers must take time off work and it is a tense moment while you await his or her decision regarding approval of your loan.

The banks lender usually will enter all of the pertinent information into the account and the system will advise him if you are someone that the bank should be lending money to. It is all very automated and really the lender is just a data entry person at this point.  Sometimes if you are close in terms of loan approval, they will have some discretion and may still approve the loan. It is also time consuming especially if you need to visit several banks to find the best rate and loan deal.

Online poor Credit Loans – these are loans that are processed online. Borrowers provide all of the relevant information to the lender via email  or by entering the information via an online web page and then await the decision. Submissions to several lenders can be done at the same time to find the best rate and some borrowers will also use a loan broker to help them find a loan that is the most competitive in terms of interest rates, terms and conditions.

Brokers can save everyone a great deal of time. Basically the broker will take all of the information from you and enter it into their system. They will be able to prequalify you and submit your application to several lenders who they are very confident will provide final approval for your loan. The broker does the work and gets paid a finder’s fee for his efforts. The lender receives a prequalified application so they save time in not having to deal with applications that are not complete etc. And the client saves time by not have to apply to many lenders online or in person as well as receiving the best interest rate and terms at the time. It is a win-win situation for everyone.

Regardless of what type of loan you apply for, try to have all of the necessary information available to facilitate the process and increase your chances for approval. You may need pay stubs, identification such as a drivers license, bank account information and other information that lenders require. Most lenders will show this information on their web site. The information requirements do vary from lender to lender.