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Bad Credit Loans with Guaranteed Approval: Is There Such a Thing?
The very mention of bad credit loans often stirs up questions about bad credit score.
This invariably refers to bad credit history.
This means the loan repayment history of the person is questionable.
Therefore, guaranteed approval for these types of loans seems improbable.
However, you do have many bad credit loans with guaranteed approval.
So, the first question is, do these options exist in reality?
Well, it can provide a glimmer of hope for many with bad credit score.
But, their credibility is important or else you can end up in a tricky situation.
Sudden financial expenses or an emergency in the family often leads you to these.
You are in urgent need of cash and have exhausted conventions options.
During those times, the bad credit loans can help you tide over the immediate crisis.
But the point is what is the risk associated with these?
Often you hear about very high-interest rates and many others.
But, most importantly who approves them?
This is important because the type of guarantee also determines your repayment schedule.
Your credit history is often a determinant of the level of risk.
It is needless to mention that a bad credit history always entails tighter payment terms.
Therefore, a guaranteed approval for these loans seems slightly improbable.
But I am sure you have seen many advertisements for instant approval.
Before you rubbish these as a scam, it is important to understand the inside story.
Let’s see how bad credit loans came into being.
What Is Bad Credit?
Bad credit loan is often used to provide loan options to those with bad credit.
So, the question is, who or what is referred to as bad credit?
Normally it refers to individuals with questionable credit history.
A low credit score essentially signals bad credit.
Bad credit is generally an indicator of high risk.
It means that the borrower runs the risk of missing payment.
The creditor also expects a greater rate of default from these borrowers.
There is also a bigger risk of missing payments at regular intervals.
But a bad credit history is dependent on several factors.
So, bad credit loans with guaranteed approval will take these into consideration.
Often bad credit is an outcome of lack of awareness.
The availability of money and timeliness of payment are both necessary.
So even if you have the money but don’t pay on time, you have a bad credit score.
Now, this can be a problem when you apply for a loan.
A bad credit loan can be a solution in these instances.
Normally, borrowers with a credit score below 579 represent bad credit.
Studies indicate 61% of these borrowers are likely to be delinquent.
The range of score between 580 and 669 also possesses moderate risk.
But the chances of their turning delinquent are merely 28%.
However, they too find it difficult to secure loans.
So, the question is how do you get around the problem?
You know you can pay back your loan but aren’t getting any because of the low score.
Sometimes, the bad credit loans with guaranteed approval can be the way out.
What Is Guaranteed Approval?
So the question is what is guaranteed approval?
In any case, you know the credit score reflects the greater risk of default.
How can it be approved then?
Well, remember most of these guaranteed approval options also involve higher APR.
Since your credit score is lower, you will have to compensate the higher interest rate.
The logic is the higher interest will make borrowers more prompt.
While the loan addresses the immediate financial need, the higher APR makes for better repayment.
There is no such thing as guaranteed approval.
It is merely a trade-off.
The approval is directly based on the creditor’s assessment.
They weigh the possibility of your repaying the loan and to what extent.
Depending on this basic factor, the approval comes through.
You have to understand that the interest payout is the creditor’s guarantee.
Often borrowers with a lower score can provide collateral for the money.
But, the trade off is that the creditor will take over the collateral in case of a default.
Often, for the borrower too, this adds as a driver for prompt payment.
They want to recover their collateral back.
Moreover, for many with low credit score, availability of funds may not be a problem.
In many cases, the problem is making the payment in right time.
So, in that situation, the bad credit loan with guaranteed approval is the best option.
What Are Bad Credit Loans?
So the next question is obvious.
What are bad credit loans?
In very simple words, these are loans available for bad credit.
It is predominantly a personal loan designed to address individual needs.
If you have a low credit score, these unconventional loans help you tide over the crisis.
There are many avenues to get these type of bad credit loans.
Apart from some typical financial organizations, you also have money lenders.
Online peer to peer lenders are fast emerging as a popular destination for these.
However, the rate of interest for these loans is decidedly higher.
Individuals can get these from traditional financial organizations as well.
The credit score often helps decide the final rate of interest.
In many ways, bad credit loan is a way to provide credit at a reasonable rate.
Bad Credit Loan: Operation Module
What exactly is the operation module for these bad credit loans?
In many ways, that also addresses their guaranteed approval also.
The high-interest loans make perfect business sense for lenders.
This is exactly why they agree to lend to individuals with bad credit score.
A poor credit score signals that repayment is the biggest risk in the whole transaction.
They can either make the payment, default on a few installments or completely forego.
So the lender compensates for all of these eventualities with a higher rate of interest.
So let’s say the lender has 50 customers and ten of these default.
But the money they recover from the rest 40 customers makes up for the losses.
This is only an expectation.
It is possible that these 10 customers also eventually repay.
In that case, the relative rate of profit is much higher.
Moreover, the creditor is able to help the borrower in terms of need.
So, they also earn a loyal customer for the longer term.
The dynamics are quite different when you have a great credit score.
In that case, the relative rate of interest is much lower.
So, the overall earnings from every penny lent are significantly limited.
This is exactly why the operation module of bad credit loan is geared to emergencies.
Additionally, it mostly addresses personal needs.
What Leads to the Need for Bad Credit Loans?
Well, we all want to be in an ideal situation.
We want credit scores above 750 and want sufficient savings in our account.
But that is mere utopia.
The scary truth is almost half of American population has a credit score below 620.
Not just that, almost 60% Americans have less than $500 savings.
So in case they are in a financial crisis, the options become limited.
Therefore, you can pretty much consider crisis as the key catalyst.
This is what leads people to explore all possible options to look for funds.
Let’s understand borrowers with low credit score have one thing in common.
They have the inability to pay the right amount of money at the right time.
This means that the overall monthly cycle has some moments of crisis.
This is often the juncture where they look for bad credit loans.
Moreover, emergencies can crop up from anywhere.
There is no way you can plan for these emergencies.
But at the same time, you have to deal with them.
At any given point in time, there are a wide number of people with this problem.
Immediate cash becomes the need of the hour.
Most people with low credit scores also have lower savings.
So, these loans are the best option to fall back upon.
However, it is very important to be discreet about your choices.
The terms of your payment and the rate of interest are key monitorable.
You are getting the money in need, but the long-term impact is important.
Bad Credit Loan Options
So when you opt for bad credit loans, what type should you choose?
Well, borrowers have the option to go for secured or unsecured loans.
These generally represent the different degree of risk involved.
In this type of bad credit loans, the borrower has to only sign a pledge.
This means there is no collateral associated with this loan.
Your promise or the contract with the lender is the only legal document.
In this case, if you default, the lender can use the contract for recovery.
In several cases, third-party collectors also intervene for loan recovery.
The risk is relatively higher in this case.
As a result, the rate of interest is much higher.
But if you really need money on short notice and do not have other options, this can be handy.
From the borrower’s perspective, this can be a rather tight situation.
Normally the third party recovery agents are quite ruthless.
In many situations, they can even resort to violence.
So that is a major factor that you must take into account.
This kind of bad credit loans with guaranteed approval carry maximum risk.
As the name indicates this is a relatively more secure option.
In this case, the borrower has to provide collateral worth the borrowed amount.
This collateral is basically dependent on the kind of money you are borrowing.
So it can include anything from a car to jewelry and even your house.
This means that the lender can seize the collateral in case of default.
So, from the creditor’s perspective, this offers a lot more security.
The lender has something material to fall back on in case of the delinquent borrower.
So, one of the most common options is the one that you go for in pawn shops.
Risks in Case of Bad Credit Loans
In case of bad credit loans with guaranteed approval, the risk is a keyword.
There is risk involved in practically every element of the transaction.
So how do you deal with it?
Well, think of booking accommodation via a third party website like Airbnb.
There are many risks involved.
You are never sure about how good or reliable the place will be.
So how do you deal with this?
Well, you go for the best possible companies.
You look at relative ratings and customer testimonials.
Based on these, you shortlist a set of options.
Among these, you choose the one that offers the best deal.
In many ways, choosing the right loan option is also similar.
Credibility is one of the key weapons to deal with risk.
Look for credibility in every possible way.
So look out for trusted players and carefully analyze their track record.
Don’t just fall for the cheapest option.
It is always important to go for the best.
Companies understand that you are in urgent need of cash.
But don’t let them misuse your necessity.
At any given instance, you will have a significant number of offers.
But it is important to find out how many are worth following up.
Consider the firm’s reputation and pay close attention to testimonials.
The customer viewpoint is the best signal of consistency.
Almost everyone will promise instant cash.
But, it is important to gauge who will actually stick with the promise eventually.
Look for Loans on Installment Option
This is a very crucial element in bad credit loans with guaranteed approval.
When you are applying for one, payday loans look attractive.
However, a closer study reveals that installment loans have better terms.
The biggest risk in payday ones is the repayment schedule.
The simplest alteration or change can lead to a long drawn out repayment schedule.
Most lenders offer relatively flexible terms for installment loans.
Moreover, your relative leverage is also far lesser in this case.
These installment based loans are more customer friendly.
It is primarily designed in a way that it does not burden your finances too much.
But slowly and steadily it allows you to get over your liability.
Factors to Consider While Applying
You need to keep in mind some basic factors while applying for these loans.
How much can you spare- One of the biggest factors to consider is your repayment ability.
Remember bad credit loans also put you in some kind of obligation.
You cannot take your low credit score as an opportunity to default.
Always make a clear calculation of the amount you can borrow.
This will help you avoid lucrative looking traps.
Often lenders try to lure you for something more than you can afford.
The only way you can avoid it by knowing how much you can spare.
Most genuine lenders will also help you make a rational call.
However, if the lender looks extra generous, it is better to avoid.
Credit checks crucial- Bad credit loans with guaranteed approval does not happen without checks.
If the lender you have chosen says they don’t organize checks, beware.
This will surely land you in a fairly risky situation.
It is always wise to go for players who undertake soft checks at least.
Most importantly, soft credit checks have no adverse impact.
Often a soft check also indicates a lender’s good indication.
It shows that the lender is serious in terms of helping you.
However, it is better to avoid hard checks.
These could be detrimental to people with weak credit score.
Often it can further bring down their credit scores and lead to more trouble.
Look at the Terms of Payment
This is also a very important factor for bad credit loans.
Remember here the terms of payment keeps changing with individuals.
There is nothing in black and white.
So, it is better to go for as clear and flexible terms as possible.
A relatively lengthy repayment schedule is always helpful.
It helps you make adjustments and recover your financial strength.
Always go for lenders with flexible terms of payment.
Even if the rates are attractive, don’t choose players who demand repayment soon.
They are less likely to make adjustments.
This might rob you of the time required to settle down your financial position.
Therefore, Bad Credit Loans with Guaranteed Approval Are Not Completely Fake.
However, the borrower and lender should be both careful.
It is always better to be professional and remember the core fundamentals.
This will make sure you will slip much lesser.
Moreover, it ensures that you can service your financial needs despite the weak score.
Ideally, it is better to maintain a credit score above 750.
But if you can’t and do not have sufficient alternatives, look for options.
Often the bad credit loans can help you tide over emergencies.
But don’t let your emergency overwhelm your judgment.
Always pay the terms and repayment schedule.
That will help you identify reliable bad credit loans with guaranteed approval.
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