“Bad credit loans,” instead of seeming like a misnomer, are now entering the credit vernacular at a rapid rate. With more and more people realizing that their financial pasts don’t have to bar them from getting the loans they need to turn their finances around, new kinds of loans are flourishing. Bad credit personal loans, whether they are for mortgages, home equity, or cars, usually come with very high interest rates. For instance, a person with average credit will often pay anywhere from two percent to 15 percent more interest on a car loan than a person with excellent credit. Someone who has poor credit will most likely face interest rates that are 30 percent higher than the excellent credit rate. There are companies that specialize in securing loans for people with below average or bad credit. However, it is important for a person to realize that even if he can be approved for a loan, he shouldn’t necessarily take it. If one’s income is not sufficient to make high monthly payments, several problems can occur. A person’s credit will get worse, and in the case of home equity loans, a person can actually end up losing his house if he falls behind on the loan.
Subprime Bad Credit Personal Loans
Many people with bad credit will not even approach a bank or credit union for a loan. Instead, they will seek independent lenders who offer subprimeloans. These loans carry extremely high interest rates and often require a person to put his home or other assets up as collateral. There is no standard rate charged by subprime lenders. They treat each case individually, and will often charge as much as they possibly can. Some subprime lenders, however, can offer loan packages that people can manage–it is important to do your homework if you are considering such a loan.
Risks and Options
High interest and subprime loans have made it possible for a lot of people to purchase cars or homes, and to refinance their mortgage payments. The risks involved, though, are higher than those attached to standard personal loans. Many credit specialists believe that people with bad credit will do better for themselves if they take steps to improve their credit before applying for loans. If a person definitely needs a loan quickly, then the bit of extra time spent researching the loan options will translate into greater security and a better chance at managing the loan terms that result.