When the T&C’s of a credit agreement aren’t complied with, lenders are quick to alert credit reference agencies. Bad credit will be held by Experian, Equifax and TransUnion for up to seven years. Before lending money, financial institutions use a process known as credit scoring to underwrite the risk of accepting a new customer. Although borrowing money will now be more difficult, non-status loans for low credit scores may still be available, albeit on completely different terms.
Popularity of Loans for Low Credit Scores
Guaranteed bad credit loans are specifically designed to cater for a section of the market that has been neglected by the banks. Lenders cherry-pick their customers and are now rejecting more credit applications than used to be the case. Specialist poor credit lenders provide fast cash advance loans to customers without the need for a credit check at any stage of the application process.
Types of Loans for People with Low Credit Scores
- Pawnbroker loans. Pawn shops provide non-status loans based on the provision of collateral, such as gold, silver and jewellery.
- Car title loans. After the value of the auto has been assessed, customers can get a vehicle title loan for up to 50% of a cars value.
- Credit union loans. It may be possible to get a fast cash advance loan on more competitive terms as a credit union is a non-profit organization.
- Loan sharks. Private, unscrupulous money lenders who should be avoided at all costs.
Lender Terms for Non-status Loans
If bad credit loan lenders focused on credit checking their customers, they’d have no business. The overwhelming majority of customers have already been rejected by their high street bank. Instead, loans for low credit scores are offered to customers who can prove their identity and can afford to repay the debt. Although there are loans for unemployed people available, it is important to consider how the debt will be repaid at the end of the borrowing term.
Cost of the Best Unsecured Loans for Bad Credit Ratings
A typical $500 fast cash advance loan will typically accrue $125 in interest over a period of 30 days. In the case of payday and car title loans, many states have placed a restriction in-terms of the maximum loan size and APR that can be charged by the lender. Always check specific state laws and compare the cost of borrowing before signing up for a secured or unsecured non-status loan.
Defaulting on Low Credit Score Loans
Most loans for people with low credit score ratings typically have a high default rate. The consequences of defaulting on a same day payday loan are that interest and charges will continue to accrue. It is also likely that collection agencies will pursue the borrower for the unpaid balance. Failing to repay a pawnbroker or car title loan will lead to the repossession and sale of the collateral. There is usually sufficient equity to completely clear the balance so any further action is unlikely.