Tuesday, September 2, 2008

Do you know a Guide to Bad Credit Card?

If your credit history has entries like default on payments of previous loans or country court judgments, you become a borrower with bad credit. So, when you apply for a loan, your case becomes that of bad credit loan.

For banks, this becomes a case full of risks because with your credit history, you are more likely to make late or even defaulted payments. As banks tend to go for safer investments, they have stringent loan selection process. They will usually steer away from loan applications from people who have bad credit history. And you have to do a lot of convincing to secure a bad credit loan from them.

However, you can still get a bad credit loan from some institutions. But these loans can cost you more as they come with high interest rates. Besides, you also have to prove to your intention of loan payback to these lenders.

But if you go for a secured loan or reduce the amount you want to borrow, you can brighten up your chances of loan approval. The lenders will still scrutinize your credit history to get an idea about your credit rating. They will offer you a deal only when they this rating satisfies their interests. After your loan has been sanctioned, you will be given the money that you have to pay back in monthly installments over a time period.

But you don't hit a dead end even if your loan application is rejected by reputed lending institutions. There are many lenders who cater to people with bad credit ratings. With a little bit of effort you may find a firm that doles out bad credit loans. So, what might be a substandard loan application for reputed banks becomes a normal loan application for many lenders.

Although, these types of lenders have developed their own selecting criteria, they are the only option left for bad credit loans. The catch here is the high interest rates they charge. These rates can be justified by the risks lenders have to take when they give out loans to people with bad credit history. And the financial regulators allow them to charge high rates because the loans are of substandard type.

But even with exorbitant interest rates, these lenders remain an alternative source of funding for people with bad credit history.

A bad credit rating does not always translate in to mismanagement of financial expenses. People who take care of their credits might also land up with bad credit ratings. A divorce or redundancies are some things one doesn't expect but their huge expenses might affect your credit ratings. There are many people who land up with bad credit ratings because they were too young and inexperienced to deal with credits.

However, if you already have a bad credit rating you should see to it that you make timely payments on your other loans. A few slips and careless attitude will only earn you a place in the credit blacklist.

Ps: Remember, for student. Its something bad if you use it for wrong way!

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