Caron Young asked:


Every borrower borrows money with the good intention of paying monthly installments to clear the debt. However, many factor influence regular monthly payments of debts by any borrower. At time the reason is within the control of the borrower but at some other time, reason is beyond the control of borrower. Therefore even with the good intention of paying the dues, he or she may not be able to pay on time. Such defaults keep on adding in the credit history which ultimately reduces the overall credit rating or score of any borrower. The worst nightmare in this case is that once, you get a bad credit rating, no lender wants to offer you any loan, considering the risk associated with offering you any loan. This risk is reflected through your bad credit rating.

However, now there are lenders who offer loans to people with bad credit ratings. There are lenders who specialize in arranging loans for people with bad credit rating . Loans for people with bad credit rating is available even for people with county court judgments (CCJ), bankruptcy or defaults on a loan will stay on file for six years; bankruptcies and CCJs are a matter of public record, with details held by the courts. Loans for people with bad credit rating come in both secured and unsecured forms.

In case of secured loans for people with bad credit rating, the borrower has to offer collateral against the loan borrower, which reduces the risk for lender. Whereas in case of unsecured loans, no collateral is required therefore unsecured loans are considered risky for lenders. To compensate against this increased risk in unsecured loans, lenders charge a little higher rate of interest than that of secured loans. Therefore, secured loan is always cheaper than that of unsecured loans.

Loan amount depends upon borrower’s profile which in turn considers the income and expenses of borrower, the amount he can pay comfortably every month, previous track record etc. Similarly, repayment duration and amount of monthly installments vary according to the loan amount, the amount that borrower can pay comfortably every month etc. Rate of interest varies according to the loan amount, period of loan and whether the loan is secured or unsecured.

Loans for people with bad credit ratings offer two very important advantages to borrowers-First, meet the expenses for which loan borrowed and second, the borrower with bad credit rating gets a new chance to improve his ratings by paying regularly.