Poor credit scores can act as a huge impediment on your way to secure financing or credit of any sort. In the United States of America, lenders regard credit scores of borrowers with utmost importance while judging their repayment capacity. Bad credit scores imply irregular payments in case of your previous loans. Lenders, as such, are doubtful of your repayment capacity. Borrowers applying for poor credit scores thus have to grapple with demands for higher rate of interest on loans, since lenders want to get back as much money as possible with a single installment. Borrowers with good credit scores – of course- have it way easier in terms of rate of interest on the loans.
Bad Credit History is a Reality
Poor credit scores are regularity and if you’re someone with a checkered credit history as well, then we would suggest you not to accept defeat – i.e to think that you will not be able to qualify for financing options at any cost. One of the easiest ways to combat the consequences of poor credit scores is to apply for personal loans because they’re generally easier to get than other forms of credit. A personal loan or a term loan is repaid over a set period of time at fixed or variable rate of interest. You can either opt for secured or unsecured loans for bad credit.
Secured and Unsecured Personal Loans
Secured loans are obviously provided against collateral, while the unsecured ones entail no such proposition. Though unsecured loans imply the least risk on your part, today, we will discuss the benefits of applying for secured personal loans for poor credit – when it comes to financing any personal need of yours including the purchase of a car or mobile or laptop or for your wedding or for that matter even for renovating your home. Read on!
Benefits of Applying for Secured Personal Loans
One of the major benefits of applying for secured personal loans is that they are the easiest to get. They imply less risk on part of the creditor as against the unsecured personal credit. Your collateral serves as your biggest credential even in the wake of poor credit scores. Should you fail to repay your loan, the bank will declare possession on the asset against which you have taken the loan.
Since these loans involve less risk for the bank, they generally carry lower rate of interest than the unsecured loans. The presence of collateral itself inspires immense confidence among lenders as far as getting back their money is concerned.
Secured personal loans are a great way to build your credit history. Since, you have put your own asset against the loan, you are way more motivated to repay the loan right on time and consequently pave the way for a solid credit history. And, we can all gauge the extent to which good credit scores can actually go on to facilitate our future needs.
However, while appreciating the immediate advantages of secured personal loans, one should not really undermine the risk involved here as well. Sign the dotted line only when you are absolutely sure that you will not end up losing your asset at any cost!