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Poor Credit Loans for Bad Credit
When talking about loans, you probably hear how banks and traditional lending facilities are turning their backs on bad credit borrowers. But why is that so? How does a bad credit rating happen? And do you have any chance to get a financial assistance?
Whether you’re just curious about a poor credit remark or you’re already suffering from it, the best way to get rid of it is to learn what it’s about.
First and foremost, a credit score is used by the lender as the basis of your approval. It determines if you’re a good candidate for the loan or if you’re creditworthy. A low credit score flags you as a credit risk and as a result, creating a new line of credit is almost impossible. Although some lenders may accept your application, you are likely to face more fees and charges because the only qualified loan you can have is the one that carries a high-interest rate.
A credit score ranges from 300 to 850 and the higher you get, the better your credit rating is. However, every lender has their own credit score but in general, it may look like this:
- 700 to 850 – Very good/excellent credit score
- 680 to 699 – Good credit score
- 620 – 679 – Average credit score
- 580 to 619 – Low credit score
- 500 to 579 – Poor credit score
- 300 to 499 – Bad credit score
Even if you have a low credit score, some payday lenders still look at it as a bad credit remark, therefore your chance of getting approved is slim. So to avoid such fate, it’s best to have enough knowledge about the causes of a poor rating. Below are some of the factors that contribute to a poor credit remark:
Defaulting on payments
Even if you think that it’s just a credit card, failing to repay it leads to a bad credit. In addition, your unpaid account will be “charged off” after a month or so. A charged off implies that the credit has given up on collecting the repayment; however, you still owe them money.
Missed or late payments decrease your credit score. It also incurs additional charges which, eventually, become hard to settle. So to avoid this, be sure to repay the loan or your credit card on time. If you can’t, talk to your lender and ask if they can modify your terms or reduce some fees.
A charge-off happens when the lenders see that you cannot repay the balances anymore. This produces a very harmful effect on your credit score and should be avoided at all cost.
One of the risks that you should consider before getting a loan is facing intimidating debt collectors. Once you stop repaying the loan, the creditor can take another step before a charge off. They can hire or sell your debt to third-party collectors who will try to get the repayment from you. Collection agencies can be frustrating because of the method they use, including calling another family member or your workplace or even threatening you with a lawsuit.
Defaulting on a loan means you have abandoned the loan completely. Your credit score is negatively affected the same way as a charge off.
Of all the causes, a bankruptcy is the most harmful to your credit remark. It’s a legal status of a person or a company that cannot settle the debts of creditors anymore.
This happens when you cannot repay your loan anymore, leading to losing your home. You are considered as a high risk because of all the missed and late payments recorded on your report.
Judgments decrease your credit score badly because it only shows that the court system has to file something against your just to repay your debt.
These are just some of the reasons why you may get a bad credit but no matter how desperate you think you are, there are still options available in the market. Lenders have noticed the increase in demand for bad credit loans, so they made limited alternatives to accommodate your needs. A personal bad credit loans for bad credit, for instance, is one of the debts that you can consider. The loan is fast unsecured loan and you can get an amount £1,000 – £10,000 with a repayment term of 12-24 months. No guarantor or collateral is required and it can be settled on an installment basis.
The amount you can have is relatively smaller than those who have a good or excellent credit remark. It also carries an extremely high-interest rate; however, this is usual for bad credit loans as this is the lender’s only way to compensate the risk. With a high-interest rate, those who are not capable to repay the total loan amount are discouraged.
But despite its drawbacks, a personal loan is beneficial especially when you don’t want to bother another family member or a friend. With its online platform, you can borrow money discreetly. However, you should only use it as a last resort; otherwise, you may suffer from a vicious cycle of debt when you cannot repay on time and you keep on extending the loan.
Nevertheless, the loan is helpful and you can use this for the following expenses
- Rent, mortgage
- Credit cards
- Home/car repair
- Buying appliances, gadgets
- Medical purposes