Bad Credit Loans
Bad Credit Loans
High demand continues for Bad Credit Loans as large segments of the population face ongoing struggles with underwater mortgages, unemployment or underemployment, and generally poor economic conditions.
Bad credit loans can be defined as alternative loans which have less stringent underwriting criteria. Put simply, bad credit loans are loans that are available to individuals with poor credit or even no established credit. In some cases this means someone with a poor credit score. However, not all bad credit loans even require a credit check and so ones actual credit score is not even considered.
So how then are lenders able to qualify people for bad credit loans?
Let’s examine the fast growing industry of auto title loans to help illustrate alternative loans for bad credit risks.
As is the case with most financial services, auto title loans can come in a large variety of packages. Some of these bad credit loans require a credit check while many others make no such demand. Length of employment, how long you have lived in your area, income and other factors may all come into play to varying degrees. Some lenders request up to four months of bank statements. Others do not even require that one has a bank account. And, while interest rates for bad credit loans like auto title loans are typically high, this too may swing widely from lender to lender.
Given the inherent riskier nature of bad credit loans, the higher interest rates and short terms can to a degree help mitigate the risk to the lender. On the other hand the bad credit loan customer is not tied into a long term loan. And, in the case of auto title loans, getting approved can be quite easy because the loan has easily quantifiable collateral – that being the value of the automobile securing the loan. In evaluating customers for these bad credit loans, this is often times the most important factor.
So then, by using the value of a lien free vehicle as collateral, a bad credit loan is much more readily available to credit challenged individuals than traditional loans.
In some cases, these bad credit loans are available with limited documentation, no credit check, no upfront fees, no prepayment penalties, no late fees, require no bank account, and the borrower can have the loan proceeds almost immediately upon approval.