Nonetheless, there are still ways on how they can get a financial assistance. Although the chances are slim, it’s a relief to know that they can get loans when in distress. These limited options also give them an opportunity to fix their damaged credit report.
Unsecured Loans For Bad Credit Borrowers
One of the few options, when you have a bad credit, is by using collateral. Known as secured loans, the loan provider will require the borrower to pledge a property like a car, house, stocks, jewelry, gadget, or anything of value. Normally, the asset remains with the borrower and it is only the title will be held by the lender until the debt is completed. It sounds risky but if your income is enough to cover the loan and you have a good financial planning, this loan option is beneficial.
Secured loans do not only secure the lender’s approval; it also gives a bad credit borrower the chance to acquire bigger amount with a lower interest rate. The catch is – you need to settle the loan; otherwise, the lender has the right to repossess the property.
Another option is the guarantor loans – or advances that use a second person to cosign and guarantee the loan. Apart from being a cosigner, the guarantor will also vouch for your identification and capacity to repay the debt and guarantee it once you decided to default. There is no collateral asked from the borrower, although there will be times when the guarantor is required to pledge a property against the loan. like any other secured loans, the property will be sold to compensate the entire loan amount including the fees and interest.
Even without collateral or a guarantor, it is possible to get a loan with a bad credit. This kind of loan is usually referred to as unsecured loans. It provides a small unsecured loans amount that is beneficial for urgent expenses. Instead of using the loan seeker’s property to safeguard against the loan, the lender will look for their capacity to settle the debt, thus a stable source of income and being employed is necessary. In case the borrower is not a regular employee, he will provide a proof that would support his financial capability.
It is ideal for tenants who have no assets to surrender or homeowners who are not willing to put their properties at risk; however, it usually comes with a high-interest rate. Another way of minimizing the risk and to discourage borrowers who cannot afford the loan is to apply expensive rates. Nevertheless, it offers a number of benefits, including:
For the loan to be approved, it will mostly require a completed 5-minute application form. No other paperwork is necessary providing that you will give your personal and financial details. Once submitted, the decision is released in a matter of hours once approved, the fund is directly transferred to his bank account. If the result is otherwise, it’s still a good thing since the borrower has more time to look for other quick unsecured loans.
Easy And Private
Most unsecured loans are acquired online, thus it’s not necessary to get out and visit a physical loan office. No need to get dressed to impress the lender while carrying a plethora of paperwork. Moreover, there’s no need to walk the streets and bump into someone you know. Your privacy is kept protected and you can borrow discreetly.
Accessible And Convenient
Applying for a loan from banks and traditional lending facilities is challenging in more ways than one. One of which is that you need to follow its operating hours. Unless you’re willing to take the day off, you cannot keep up with their working hours. Luckily with unsecured loans, you can send a loan application any time of the day. All you need is a reliable Internet connection and a laptop.
To take a loan, it’s necessary for the borrower has to meet the criteria set by the lender. One is to provide a reliable source of income and an employment. Meanwhile, there are unsecured loans online which can approve those who are jobless, working part-time, or as a freelancer. As long as they have an alternative source of funds such as benefits, alimonies, or pension, getting the loan is highly possible.
Properties Are Kept Safe
First, no collateral is involved with unsecured loans, thus there’s no way for the borrower to lose any of his valuable items such as a car, phone, house, etc. However, it doesn’t mean that you can just take out any loan and default on it. If you stopped repaying the debt, regardless of your reason, the lender will report it to the credit bureau and your credit score will be badly affected. They also have the right to take legal actions against you.
Disadvantages Of Unsecured Loans
Expensive interest rate
Most bad credit loans, especially unsecured loans, come with an exorbitant interest but you have a chance to at least minimize the fees by looking for the right loan provider.
Although a credit report is not a requirement, some lenders are too strict with their criteria. They may only approve borrowers if they have a high income or at least employed by a reputable company.
Since it provides a small amount, you need to settle it in one lump sum within two weeks or one month. This is difficult for some borrowers because the overall loan amount is bigger than the actual amount you’ve borrowed.
305.9% APR. £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)
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