When you are in a risky financial situation but you do not have the money, the only option left is to get a manageable loan from your lender. Lenders will check your income, credit score and job status before they give you any form of loan. What happens when you have a poor credit score? Typically, lenders do not offer any form of loan to people with a poor credit score. When you have a poor credit score, it means you do not make payments on your loan on time or at all or generally lack a credible credit history. Lenders are mainly concerned about your capability to pay back the loans on time or fully. You may not qualify for a basic loan, but most financial institutions can offer you a bad credit loan
Here are some of the benefits of a bad credit loan
Your credit history will not matter when you are applying for a bad credit loan. This is the main and best part about getting a bad credit loan. Lenders will not bother analysing your credit history as long as you are applying for the bad credit loan. They are mostly usually worried about the mean of payment and will look at your income source. For conventional loan, lenders will look at your credit score to determine whether you qualify for the loan or not.
The approval is fast
Conventional loans are very difficult to acquire, given their terms and qualifications. It can take you a long time to get an approval for a conventional loan. With a bad credit loan you won’t have to worry about all that. The approval rate ranges from 85-90% which is good news for you.
You can use the loan to improve your credit score
The main reason you can’t get a normal loan is that you have a poor credit score. You can use this opportunity to get some positive information on your credit history and report. It’s simple! All you have to do is make all the loan payments on time, not missing even a single payment. With time, you will raise your credit score.
Here are some of the main disadvantages
The interest rates are going to be higher
When you do not make your payments on time, lenders are not going to trust you when it comes to clearing their loan payments. This is why most of them do not want to risk approving your loan. if you have a poor credit history, they won’t trust you to make the full payments and therefore compensate by charging you a high interest to cover the risk.
Chances of borrowing from a bad lender are high
Some lenders seem to take advantage of people who are not doing well in the financial sector or are known to make bad decision. If you are not careful with whom you borrow money from, you may end up with a worse score than you started with.
The final word
Even though they have high approval rate, you should not take up a bad credit loan unless you are facing a financial emergency or business crisis.