Nothing in this world is devoid of its pros and cons. Anything, which has something good to serve, sometimes becomes threatening. Even medicines are taken with a precise dose and their excess can invite severe health issues.
This is perhaps the nature of every worldly thing. Of course, financial matters cannot be an exception. It is necessary to stay aware of not only the good but also the bad effects of something. Loans are among the most common financial products with their own nature and purpose. This creates a list of pros and cons that you can relate to them. Special concern is for the loan choices that solve the bigger problems like poor credit situation.
The loans for bad credit are among the most sought-after among the borrowers. The ubiquitous presence of credit score complications keeps these loans in timeless demand. But with benefits, they have some drawbacks too and it is better to stay aware of them.
Start with the benefits
It is always nice to have a positive start, as it helps you to get rational to see the other realities.
Borrowers have no reason to worry on their credit histories
This is the prime benefit and the most magnetic. After all, this is what ensures the importance of the existence of bad credit loans. The poor credit lending companies do not reject the application just like their conventional counterparts. This becomes possible because the bad credit lenders consider factors like increase in income, improvement in recent financial behavior, etc. This changes the whole picture and makes things easier for you.
Instant approval decision
This is the time savior as well as last-minute savior. At the last moment when you are stuck in a financial situation and need money, finance companies reject you due to a low credit score. But bad credit loans are a pleasant contradiction to this practice. The lending companies such as British Lenders offering bad credit loans with instant decision and no fee offer funds on guaranteed approval. Once approved, the funds reach to your bank account in a short while.
Improvement in credit scores
Lenders provide the funds with the intention to help you improve. No need to take the big amount, you can take a small amount and can repay it through timely instalments. When it happens, the credit score improves with every timely repayment. By the end of the loan term, the aim of improving credit ratings gets fulfilled quite obviously. After this, it is possible to move on and qualify for new financial opportunities that were once impossible for you.
Bad credit funding is of short-term nature and no obligation is part of the procedure. No guarantor or collateral is required to back your loan application. The repayment capacity is the biggest factor to help you get through the application procedure and get accepted for the loan. This again saves a lot of time as the absence of obligations speed-up the procedures. Just forget not to present good current income status.
Drawbacks – Can’t avoid
Now the other side of the coin that may not be too promising but necessary to make informed financial decisions.
Possibility to get caught by bad lenders
‘Bad’ means the unethical ones. Poor credit situation makes you prone to fraud lending companies that are not determined to help people. Their target is just to exploit the financial weaknesses and take the maximum possible benefit. They know very well that a person in a poor credit situation is always eager to find a solution.
The tricky lenders catch your attention through over-popularised advertisements and eye-catchy rate quotes. Once you get into their grip, they take money in the name of hidden charges, upfront fee, etc. but finally leave you with deep regret. Their promises to get you approved never turn into reality.
You may get in the repeated debt (vicious) cycle
If you miss paying the installments on time, your credit score situation becomes more complicated. Your loan becomes never-ending as with every delayed or missed repayment, the interest rates keep adding. This gives installments a monstrous size later and you find the escape difficult. The biggest threat in such circumstances is of getting into the worst credit situation, which is an announcement of ultimate financial destruction. No one wants to ever bear that, face that or even think about that.
Not much scope of customisation in high-interest rates
The bad credit loans have high-interest rates and that gives a reason to worry. If you are already in multiple debts, taking another loan with a high rate of interest can be a big problem. High rates make the repayments difficult with bulky installments. However, some lenders can give you relaxation on rates if your poor credit rating is not consistent. The luxury of having no guarantor or collateral obligation also gives a platform to the increased total cost.
The above benefits and drawbacks can enhance you on the part of financial literacy. When you know everything about something, anxiety and confusions stay away. In financial decisions, it becomes even more important.