For many people who suffered greatly due to the economy crisis that hit the country a couple of years ago, bad credit loans are a new alternative that offers both hope and a chance to set their credit score straight.
Bad credit loans are, as their name states, loans granted to people who for some reason have poor ranking. In the past few years this types of loans have gained a lot of popularity due to how accessible they have become and how helpful they are when facing a financial urgency.
There is of course more than one kind of bad credit loan, so if you are planning on benefiting from one, why then we don’t take a look at the two main types that you can choose from.
Unsecured Bad Credit Loans
Bad credit loans of the unsecured type are easily the most popular ones. This type of loans, as their name implies, do not require you to have any kind of valuable asset to give to the lending company as a warranty for your bad credit loan.
Surprisingly, while it is understandable for this type of bad credit loan to be very popular, it is also just as popular among lending companies because unsecured loans are far more appealing to potential customers. This in turn helps lending companies gain much more clients and widen their portfolio, even if it is with people with bad credit.
As is expected though, not every customer acts in good faith when applying for a bad credit loan, which causes lending companies to be far more precautious when it comes to offering unsecured loans. As a result, this type of bad credit loans are only offered for small amounts (generally no more than just a couple of thousand dollars) and the requirements from lenders to grant them are also more strict every day.
Secured Bad Credit Loans
While almost the same on paper, secured bad credit loans are quite different and offer additional benefits when compared to their unsecured counterparts.
Obviously, secured loans are given out only after lenders “secure” the funds they release to you, which occurs the moment you pledge a collateral that is of a value at least similar to the amount you apply for. So, in case you can’t repay the bad credit loan on time or fail to repay it entirely, the lending company can use your asset to recover their funds.
Now, while your assets might definitely be at risk if your pledge them to a lending institution, secure bad credit loans also provide you with a series of advantages and added benefits, like:
• The qualifying process for a secured loan is much faster.
• Providing a “warranty” to your lending company will give you a good leverage for you to negotiate better interest rates and loan terms.
• Bigger amounts are offered for secure bad credit loan holders.
And that’s about it. If you have more questions about bad credit loans and its different types, feel free to browse from among the lending companies featured above. Their sites are all very comprehensive and offer a lot of useful information.