Life has a way of taking nose-dives from time to time. When that nose-dive is in relations to finances, the result can be hugely damaging to future financial ambitions, with a bad credit rating causing havoc with loan applications and credit purchases. However, loans with bad credit can help to alleviate the situation.
In recent years, however, the choice of loan sources has increased greatly, thanks to the arrival of online lenders. There are clear reasons why people like to turn to lenders who operate only on the internet. First and foremost is the fact that lower interest rates and faster approvals on loans with bad credit are available.
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In fact, it is generally agreed that approvals are far more likely online, thereby creating the sense that online applications are followed by guaranteed loan approval, despite bad credit. But even though the ease and rate of success of applications are higher than with traditional lenders, some applications are rejected.
Online Lenders Sometimes Say No
The simple fact is that online lenders are businesses too, and want to make profit. This means that every time they grant bad credit loans, they have already assessed the chances of the borrower defaulting.
While the desire for profit is something that online lenders share with traditional lenders, there are a number of policies they implement that differ. These obviously affect the number of approvals on loans with bad credit, but can also relate to the small print that many of us never really bother to read.
However, it should be understood that these policies, and the specific clauses and conditions that they include, means that guaranteed loan approval despite poor credit really does not exist. Every applicant needs to satisfy set criteria.
Typical Criteria Online Lenders Apply
There are four key areas that should be taken into account when dealing with online lenders. First of all, the idea that credit scores have no bearing on loans with bad credit is not actually true. Some lenders will offer no credit check loans and promise that even the lowest credit score will not prevent an applicant from being approved.
But while these may well be true, the fact remains that the credit score will affect the interest rate and the loan limit set by the lender. So, applicants may enjoy approvals on loans with poor credit, but their monthly repayments could be quite high, and the chance of getting the full amount needed could be hampered.
For example, a small personal loan of $2,000 might get guaranteed loan approval despite bad credit, but a loan application for $10,000 may be rejected because the credit score is too low.
Secondly, the chance of getting the loan with poor credit needed is greatly enhanced by the inclusion of collateral. Lenders, even if they are online lenders, prefer secured loans over unsecured ones. In return for this extra security however, lower interest rates are offered, as well as approval on loans with poor credit of any amount, so long as it is covered by the collateral.
Thirdly, the contract between lender and borrower is no less significant when dealing with online lenders. Therefore, it is essential that the small print is read and understood. It might seem a lender is offering guaranteed loan approval, despite bad credit, but the small print may stipulate a minimum limit, increased interest rates and severe late payment penalties.
Individual Lenders
Finally, it is important to understand that no two lenders are the same. What this means is that when applying for a loan with bad credit, it is important to know who the lender is. It is a matter of accountability, so contact the Better Business Bureau and find out if the lender is all that it seems to be.
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