Loans for people with bad credit are now one of the cost common financial solutions for people suffering with a bad credit history and this is due to its advantages over other methods available and the security of repayment depending on which type of loan you choose personally. Here we will look at the types of loans available for people with bad credit and its benefits over competitors.
Much like a standard bank loan there are 2 types of loans available; Secured and Unsecured. In case you currently don't understand these two terms, a secured loan required a valuable asset in your possession to be put in the lending parties hands which they can claim if you fail to repay your loan with the terms and conditions, this is usually a house or car for example and it means the vendor has some security against their money. As the name states an unsecured loan is the opposite of this, no upfront item is required and in turn this makes obtaining a loan a much faster and simpler process.
These two different loans have their own set of advantages and disadvantages. Starting with secure loans, these can only be applied for if you already own an object of significant value that you can give to the vendor, loans amount will be substantially higher than that of an unsecured loan, the payback time will be longer and the interest rate will also be significantly lower, however you MUST have an item that the company find valuable otherwise you will be declined swiftly.
Unsecured loans are good as they do not require this upfront asset as mentioned above. An application can be filled out in minutes and without a credit check or any items being handed over, paper work is minimum and the loan will be accepted faster than you can imagine. The disadvantages of this is that because the company is putting their trust in you to abide by the agreement and pay back on time without any form of security, the interest rates are incredibly higher than that of the secure loans. On top of this, the loan amounts available are lower ($1,000 - $5,000) and the payment period will be at least half.
So how are these better than the other solutions available?A few of the other financial solutions available for people with bad credit OR credit cards (for people with bad credit) or prepaid credit cards or pay day loans.
A pay day loan is a very short term loan (usually the same month) and like unsecured loans for people with bad credit they are also very easy to apply for and the money is usually in your account the same or next working day. The problem with these loans is that the interest rates soar above 1000%. Credit cards have the same problems they have for any one, monthly charges and only offering you a small amount of money. Due to the repayment nature of a credit card it will usually be harder to use a credit card sufficiently to better your credit score when compared to using a loan that you can pay back over a long period of time, this is because if you miss a monthly bill on your card it will knock down your score even further.
Loans for people with bad credit can be very beneficial and help you whether you are just looking to go on holiday, sort out your bad credit rating or looking for a long term investment. Be sure to do plenty of research to find the appropriate loan for you.