Bad credit loans are given to those borrowers whose credit history is less than satisfactory. In other words, they have defaulted on repayments on previous loans. The loan officer's reluctance to give loans in these types of situations is understandable, as the borrower's credit history suggests that he is more likely to repeat the offence.
However, all is not lost for the defaulter. There are institutions that issue loans for such offenders. Of course, the risk factor inclines the lender to issue a higher interest rate. As it is, the borrower with a bad credit history has trouble enough convincing the lenders to release the loan.
The chances of getting approved are greater if the borrower reduces his loan amount or goes for a secured loan. The borrower's credit history will be duly checked for evaluation of the credit rating. This is a significant factor that loan officers look at while contemplating whether or not to pass the deal. Should the loan application be accepted, he will be given a particular amount, which he will have to repay either in monthly instalments or over a fixed period of time.
A bad credit rating does not constitute a disaster; however, missed payments of previous loans is sure to get the potential borrower blacklisted. It is important to note that just about anybody can have a bad credit rating. For e.g, the borrower may not have any kind of previous credit or he may simply be too young to apply for a bad credit loan.
There is no guarantee that acknowledged lenders will provide bad credit loans. However, a borrower can find numerous, smaller firms willing to offer bad credit loans [http://www.uk-direct-loans.co.uk/badcreditunsecuredpersonalloans.html]. It is also possible to find lenders who actually specialise in bad credit loans. These firms are ideally designed for borrowers who, owing to their bad credit history, have been rejected by the traditional banking fraternity.
The loans offered by these lenders are substandard by regular parameters, and regulators give them the leeway to charge a comparatively higher interest rate. These lenders are double edged swords. While the chances of getting a loan from them are distinctly greater, so are the interest rates.
Banks, because of their investments, tend to view bad credit loan applicants with a lot more caution. The borrower has to convince the bank that he has the ability to repay the loan.
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