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If you have a credit rating of less than 600 and are in dire need of money, do not despair. You may still be qualified to apply for bad credit loans which can be best described as advances for high-risk individuals.
When applying for bad credit loans, you have to choose if you will go for secured or unsecured bad credit loans. Your choice of the type mainly depends on your intended use for the loan.
Secured Bad Credit Loans
Secured bad credit loans require borrowers to present a valuable asset as collateral. Since the lending company has the collateral to hold on to, the secured loans pose lower risks to the company. Since this type of loan is low risk, the approval ratings are high. People who apply for secured bad credit loans can borrow huge sums of money, almost commensurate to the value of their collateral. They also enjoy lower interest rates and a longer payment period.
Secured bad credit loans are best for people who need a considerable amount of money for a very important purpose and who have assets they could pledge as collateral. It is also best if the borrowers have regular source of income that could cover the periodical repayments.
Unsecured Bad Credit Loans
Unsecured bad credit loans do not require any collateral. Thus, high-risk individuals who have no valuable assets may still avail of unsecured bad credit loans. Since there is no collateral, unsecured bad credit loans put an even higher risk to the lending company. The lending company compensates by asking for additional proofs of character to determine the capability of the borrower to pay the loan. Aside for the loan application forms, the lending company also asks the borrower to submit the following documents: detailed contact information, proof of identity, proof of residence, and proof of regular income.
People who apply for the unsecured bad credit loans may borrow a small amount of money. The payment terms are shorter and the interest rates are higher than the interest rates of secured bad credit loans. Cash advances or payday advances are examples of unsecured bad credit loans. The people who will best benefit from this type of loans are those who have immediate money problems or those who just need financial assistance to tide them over until the next payday. Unsecured loans may also be used to purchase important items such as personal computers, car parts, and materials for home repairs.
With cash advances, the repayment term is usually two weeks to one month. The borrowers could choose the payment condition which works best for them. They could choose to give a predated bank check or to arrange for the loan amount, the fees, and the interest to be taken from the bank account.
So, if you are thinking about applying for bad credit loans, it would be best if you were to thoroughly consider the following: your purpose, your assets if there are any, and how you intend to pay for the loan. Take ample time to shop around so that you could choose the kind of loan which will best suit your needs. If managed properly, bad credit loans could be your best option.