Multiple banks. Different interest rates. Call it a "conflict of interest".

    Bad Credit Loans

    A bad credit is when a borrower carries a higher credit risk. When a borrower has a low credit score, it indicates a bad credit. The creditors will avoid lending money to the individuals with a bad credit history as the borrower might default on making the payments.

    A borrower's credit history depends on various factors such as the amount borrowed, amount of available credit remaining and the number of times the borrower has defaulted in repaying the loan amount. The borrower's credit score will be affected by the late fee being charged or if you ask for an extension on the loan or opt for the loan renewal option.

    While the borrower might've been in a difficult financial state and defaulted on the loan repayments. But, the default results in bad credit score. That however doesn't mean that a person can or should not be eligible for further loans.

    People with bad credit history can get a bad credit loan. However, one must remember that a bad credit loan will attract a high interest rate resulting because of the bad credit history. But before applying make sure that there is a good chance for you as a borrower, to avail the loan, if the application is cancelled, it will damage your credit score further.

    What is a bad credit loan?

    A bad credit loan is a loan for people with a bad credit history. You get a bad credit history:

    • When you have missed repayments.
    • When you missed bill payments.
    • Or when you have had a failed credit application.
    • Or when you have never borrowed in the past and the lenders are unsure if they can rely on you to make the repayments. Hence making you too much of a risk to some lenders.

    When should you consider for a bad credit loan?

    You will only opt for a bad credit loan when there is not much of an option left for you. If there is no way you can manage your finances without having to borrow, do not take a bad credit loan.

    Only consider for a bad credit loan:

    • When you can manage the loan and its repayments and help repair a bad credit score.
    • When there is no other way to manage your current deficits.
    • When you want to consolidate your debt or extend the repayment period or cut your interest rates.
    • When you have taken a bad credit loan, do not take any further short term loans or credit.
    • When you have planned out your finances and are sure that you can make the repayments. Plan for overpayments to pay off your loan as quickly as possible. This is possible when you know extra money is going to come in your way.

    Do proper research before taking a bad credit loan. You need to look for:

    • The cheapest interest rate that is available.
    • Make sure you are eligible to get the loan before applying for it. If the application gets rejected, your credit score will be damaged further.
    • Get a better idea of the actual rates available and make the right application.

    What is the difference between secured and unsecured loans?

    Secured Loans:

    If you have a house or an expensive car or property or any other significant asset, then you can use it as a collateral. This will in turn make you eligible for a secured loan as an option. Secured loans are given at lower rates than the personal loans. Sometimes, when you need a huge amount, this will be the only option that you will be left with. But always meet your repayments as you might lose out on the asset you kept as a collateral.

    If you have had difficulty making payments on your loans never keep your home as a collateral. Take different factors into consideration before you turn your Unsecured Loans to secured loan especially if you have had a bad credit history. The rates may seem attractive, but if you miss making payments, you might lose out on the asset you kept as a collateral.

    Unsecured loans:

    Unsecured loans are given to the borrower based on their creditworthiness. You as a borrower will not have to have a collateral. You must have a high credit score to avail an unsecured loan. The loan is not guaranteed by any asset or property. The interest on the loan is fixed and due at the end of a specific time period.

    To avail an unsecured loan, maintain a high credit score. You must make all the payments and repayments on time and not default even once.

    Are there any alternatives to bad credit loans?

    Yes, there are limited alternatives that you can consider before opting for a bad credit loan. The options are:

  • Speaking to your current financial provider to offer you a tailored loan considering your circumstances. The current financial provider may be able to help you out in this regard than you going to a new provider for a loan.
  • You can get an overdraft on your current account at 0% interest rate for a certain amount. Never cross your limit on the overdraft as the unarranged overdraft fee will turn out be very expensive.
  • Credit unions that are community operated can offer a real alternative to banks to those going through financial difficulty. You need to be a member of the credit union to avail the loan. These organisations are supportive and their main intention is to serve their members.
  • Credit cards are another option that is available to those with a bad credit history. There are dedicated cards for the people with bad credit ratings. Though they may have lower credit limits or with higher interest rates. Also remember a failed application will damage your credit card further.
  • There are payday loans. But it is advisable not to take this loan.
  • Use your own savings for as long as you can. It is better to have used your saving than to pay the high interest that are being charged on loans.
  • The government also offers interest-free budgeting loans to those who can't afford their rent. But those with urgent requirements only will receive the loan.
  • Turn to your family and friends for a loan. You can work out a mutually beneficial deal out and they will be much more understanding than any financial body. You can agree on a feasible interest. Be clear as to how you will make the repayment as there is a good chance that the relationship may be affected due to this. Agree on a certain time frame and commit to it.
  • Whatever the problems are, stay away from the loan sharks. Consult with your existing lender and work out a deal that will avoid you from defaulting your payments and saving you from a bad credit history. The lender will at all times assist you and advise you how to go about your current financial status.

    Bad Credit loans in India

    In India, there are no bad credit loans offered to the borrowers. So, what if a person needs immediate cash and it is an emergency. But due to his bad credit score, he will not get any loan from the leading financial providers. In those cases a person can consider a bunch of alternatives than applying for a loan with the bank. If a person with a bad credit rating applies for a loan with a bank and the bank rejects the application, the rejection will affect his credit rating further. Now that is something that you would not want, making a situation worse than it already is.

    So, the next question is how will you deal with this problem in hand?

    Your need for immediate cash can be solved in a bunch of different ways. First off, go talk to your current banker with whom you have had maintained business with for years. It could be a neighbourhood bank where everyone knows everyone and knows your situation well. If you have had a nice rapport with the manager, he can surely help you work out a deal that will work for you as well as the bank. This way you get a chance to fix your bad credit history by making all the payments and repayments on time or way before it. Your current banker will understand why you would've defaulted in the previous payments and understand your situation and help you out. But, if you approach a new banker, he would not be so considerate of your situation and another rejection in your loan application will further damage your credit ranking.

    In India, if you have a fixed deposit account maintained with a bank, they will provide loan up to the limit of the amount in fixed deposit account maintained with them. You can also get a credit card on your fixed deposit amount. Though the cash withdrawal limit might be lower, it will still take care of the need for your immediate cash requirement. But never cross the limit that has already been provided by your banker.

    Indians are all about saving. If you have deposited certain amount at some bank, break the deposit and use the money, it is still better than you getting into a debt. Try to stay away from debt as much as you can. It is better to find a way to manage your own expenses. There won't really be any need for you to be taking loan at certain times. Some items are not even worth taking loan for. And most importantly there is absolutely no need to take a Secured Loan. It might seem like a sensible option at that particular time but losing your house, property or your car over loan is not worth the use the loan amount came for. It is always a trap and the banks will not take into consideration if you will be homeless or won't have shelter all they care about is retrieving their money. In that case, you can always borrow from your family and friends. They will be more than willing to help you out. And they will be more considerate of your situation and will not take advantage of the vulnerable situation that you are in.

    Whatever the problems are, stay away from the loan sharks. Consult with your existing lender and work out a deal that will avoid you from defaulting your payments and saving you from a bad credit history. The lender will at all times assist you and advise you how to go about your current financial status.

    Apart from these there are also Co-operative societies that lend financial aid to the members of the society. Make yourself aware of the various lender around the area you reside. There is always a way that someone will go out of their way to help you. You can always approach the religious institutions that will have a certain amount set aside to help those who are in financial difficulties. If not, there are always family members and friends that you can ask for favours.

    It is always a feasible option to turn to your family and friends first as they will be considerate of your financial situation and not try to exploit the fact that you are in urgent need for money. Also, you can set a reasonable interest rate and the term of the loan. But make sure you do not default on the payment as the relationships may suffer due to this.

    Stay away from the loan sharks and from the secured loans as there is no way out of the arrangement unless you have made all the payments. And when you do take a loan, make sure you make all the payments on time and improve your bad credit history. For as long as you can use the money you have saved instead of getting more debt than you can handle. Always clear off a loan first before taking another one. Do not take a loan unless it is necessary.


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