What does credit have to do with loans? Well, because banks want to know how risky it is to lend you money. But just because the credit history bureau put a black mark on your record doesn't mean you won't be able to get a loan for the next few years. You may have trouble getting a loan from most banks and financial institutions that offer regular loans, but there are also a number of companies that are willing to give many loans to people with bad credit history.
How do poor credit loans work?
There are two kinds of loans for people with bad credit on the market today: secured loans and unsecured loans. People with bad credit find it easiest to get a secured loan. To get a secured loan, you must put up some property as collateral. For example, if you want to borrow money to start a business, you could use your home as collateral. The loans officer will decide whether or not to give you a loan based on how much your home is worth, how much debt you have, and your credit score.
Don't worry if you don't have a very good credit score. When you apply for secured loans, your credit score won't be the main reason why you get the money. Most of the time, your credit score and the amount of debt you have will only be used to help decide how much of a loan you will get. In a secured loan, what really matters is the value of the property you are using as collateral. In fact, if the value of the property that is used as collateral is much higher than the amount of the loan that is being asked for, the bank will not check the borrower's credit score. Most financial institutions that offer bad credit loan programmes are pretty easy on you when it comes to checking your credit, since they already know that your score isn't great. Also, the loan is already safe if you are willing to put up collateral. Whether or not you pay back the loan, the bank will not have much trouble getting its money back. To pay off the loans, they can always take your property.
On the other hand, it's tougher to get an unsecured poor credit loan. People with bad credit are seen by banks and other financial institutions as a high financial risk. Most companies that offer loan programmes for people with bad credit have strict requirements and hard terms and conditions. But the good news is that you can still get an unsecured poor credit loan even if you have a bad credit history. This means that you can still buy a new car without putting your house up as collateral.
