A need for money can arise anytime, sometimes a person doesn’t have advanced information of money need and they have to arrange in very less time. Thanks to lots of banks and various financial institution from where an individual can get a personal loan easily. Well, this thing seems to be good for only those who have a decent credit score, but things are completely different for those who have a bad credit score. It simply means a person with good credit score can get a loan easily as compared to those who have a bad score. So, exactly what is a credit score? And why it is vital to factor in getting a loan?
A credit score is simply the measurement of the capability of an individual to repay the loan in numeral terms. It acts as a benchmark to know the creditworthiness of a borrower and its range from 300 to 850. The higher the credit score, the more capability has the person have to repay the loan. There are various factors which come into play while considering the credit score such as payment history, total amount obligated, length of credit history, types of credit, new credit. A decent credit score can help you to reduce your interest rate and bad credit score make invite more interest rates.
Why credit score is vital?
Well, it is simple just consider this question, can you lend money to anybody who can’t ensure you to repay? More probability is that you may not lend. The same principle is applied by the bank or financial institutions.
Up to this, you have a pellucid picture about the definition of credit score and its importance. But not the entire person has a good credit score, so they don’t get a loan? Well, it’s not like that, how can they be left behind. Not everyone has decent savings to dip into; many take a loan to sustain their needs. According to one study, more than 50 per cent of the Americans have a bad credit score (so how can they get a bad credit loans?). If you belong to this category (bad credit score) and are finding ways to get bad credit loans, then you can read further to know.
Bad credit loans:-
- It is a loan provided to a person having a bad credit score and is offered by various financial institutions such as banks, credit unions, payment banks and online lenders.
- It comes with high-interest rates (you may be thinking even though you have bad credit score still a lender is charging high-interest rate, well, comrades its true and you have to understand this. It simply because of your bad repaying history and it may be risky for any lender to pay you).
- So, what to do? A person with bad credit score has no right? Well, it’s not the case, they have many options. They can take two basic types of loans, the first one is secured and the second one is an unsecured loan.
- Secured loans are those in which loan is taken for any commodity like car or home thereby giving an option to the lender to take that commodity in case of failure to repay the loan. Simply in this types bank has the option for collateral to secure their loan. In secured bad credit loans, mortgage, car loans, home loan, shop loans come.
- The unsecured loan is the one in which lender has not an option to take something in their custody, but here lender has an option to take a legal action against the defaulter. In unsecured bad credit loans before payday, personal loans, a credit card, student loans comes. It is usually a contract between a lender and borrower accepting certain terms and conditions.
Well, after reading the above points you have the idea of bad credit loans, now comes the question of whether they are safe or not? It is said by the experts that these are risky, as you can also understand this simply by the fact that your lender has the information about your bad credit score, still they are giving you a loan. However, you should consult a reliable person before taking this type of loan, hope you have liked this article.