Bad credit loans are the fastest loan approval scheme relative to the traditional personal loan scheme. It is an instant access to finance when you are in emergency or urgency for cash. Bad credit Personal loans are available in two forms: 1. Secured personal loan and 2. Unsecured Personal loan. Secured personal loan or mortgaged loan is a loan which is backed by security asset in form of real estate property, jewellery, furniture, automobile etc, which has a future value equivalent or greater then the loan amount .If the borrower makes a default in payment, then the collateral asset is sold off to realize the loan amount .As for the reason the secured loan has the element of security, the rate of interest for the loan is high. The risk return trade off explains that higher the risk, higher the return and vice versa. Based on this principle the secured personal loan calls for lower risk and lower return for the bank as the rate of interest they charge is relatively low and it is on other hand a favorable position for the borrower. The unsecured loan on the contrary is subject no collateral security or pledge and in case borrower makes default in payment, the whole loss will be borne by the lender. As the risk factor is high on the part of unsecured loan lender, the return will automatically on higher side, so it follows high rate of interest. In case of bad credit loans it is generally believed that looking into the poor condition of borrower’s history, it is difficult or not possible to grant unsecured bad credit loan, which is not at al true in today’s concept. At the times when economy of the country is in downside; the bad credit personal loans are flourishing business where they are making profit in financing unsecured loan at high interest rate, much higher then the market lending rate. Are bad credit borrowers honest? Looking into the factor of inability to justify the track record of earlier debt settlement, it is believed that bad credit borrower is not at all trust worthy and it is an element of risk for the lender to process them further debt which is not at all true 100%.Yes partly it is correct to say that it is a risky business of loan approval to bad credit borrower but it is incorrect to call them dishonest, as because of inflation or price rise situation in economy ,the personal loan borrower makes default in payment of the monthly installment from his current income after meeting his current level of expenditure. Also in situation of deflation or economic depression, the productivity slows down, which ;leads to unemployment and low income ,which is again responsible for default in making loan installment payment at the borrowers end. So with the insufficient income and increasing level of cash outflow in form of expenditure leads to bad credit score. In order to meet the personal expenditure demand, we take personal loan, and if you have a bad score in your credit history pertaining to non payment or skipping of loan installment, it is always advisable to apply for bad credit personal loans .
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