Whenever you wish to make a loan, you have to have collateral. This could be a valuable possession like your home. If you default on the repayment of the loan, you may well lose that valuable asset. With the onset of unsecured bad credit loans, you do not need to provide security.
If your credit score is below average or non-existent, you will more often than not have a problem with obtaining a loan from most lending companies. You will be considered a bad credit borrower if you have missed several payments on a mortgage loan, credit card or on other debts. If you have been bankrupt you will also be considered a high credit risk.
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People who have no credit history whatsoever, for example those who have not borrowed before, may also experience difficulty in obtaining a loan. Those who are self-employed may also experience difficulties in being granted a loan. They may not have a bad credit rating, but the inability to provide proof of income may pose a problem.
Bad credit unsecured loans are normally offered by specialist private lending companies. Banks and conventional lending institutions are not willing to undertake the risk that is involved with this type of loan.
The lender will still do a credit history check in order to find out the status of your credit rating. The reason for this is for them to ascertain the reason for your bad credit score. This information will assist them in determining the fees and interest rates that they will ultimately charge.
Because of the high risk factor involved for the lender, the interest rates and fees charged will be higher than the average loan. Also, these loans normally have a limit to the amount you can borrow. You have to agree to a set repayment period although there are flexible loans which will allow you to pay more if you can, or to take a break in payments. There may well be hidden clauses regarding this. The onus is on you to make sure that there are no additional charges or penalty clauses in the contract you sign.
This type of loan could be a stepping stone to repairing your credit rating. If you manage this loan responsibly, you will not have a problem in the future. Make a determined effort to do your repayments on time and in full. This will stand you in good stead if you require further unsecured bad credit loans.
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