If you have defaulted in your past loans, there is certainly a reason to worry if you would still qualify for another credit facility. Defaults in loan repayment certainly affect the credit score, which in turn would hamper your future control over your financial resources. In the past, it had almost been impossible for such borrowers to get another loan. However, these days, there are personal loans with bad credit.
Borrowers who have had problems like loan arrears, IVAs (individual voluntary arrangement), and defaults in the past now have an option. It would be very difficult, if not impossible for such borrowers to access another loan from any lending institution, which surely needs to make sure loans are provided only to people who have the capacity and ability to repay the amounts. Now, personal loans with bad credit are being offered to provide financial support for individuals even with poor credit. There are two types of such loans.
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Unsecured personal loans for people with bad credit are those that are provided without any form of collateral. These loans are generally harder to acquire, but many lending institutions are now relaxing their stringent policies to cater to more people. The repayment duration for the loan usually lasts for about six months in the minimum to about 10 years. Interest rates could be a bit higher compared to other types of loans. These are recommended to borrowers who have dire and urgent needs for financing.
On the other hand, secured personal loans with bad credit require valuable asset as collateral. In comparison, these loans could be easier to access than unsecured loans. Lenders approve the borrower's application for loan and amount of loan based primarily on the market value of the collateral. The amount could be higher compared to the amount provided in unsecured loans. Repayment period could be extended to up to 25 years.
You should not be surprised though to find that interest rates applied to both unsecured and secured personal loans with bad credit are higher compared to normal loans provided to borrowers in the market. You need to understand that lenders need to impose costs on the higher risks they are taking for granting personal loans to people with poor credit.
Before you apply for any of such loans, be sure to check out terms and rates applied by different lenders. You should still strive to find and get the best and most competitive loans available for people with bad credit records. The market now has many of such products.
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