Although some banks may approve bad credit bank loan applications, you need to keep in mind that they may charge you a higher interest rate. If you have bad credit or poor credit history, you may have trouble convincing these lenders to approve your loan application.
You can increase the chances of getting approved by applying for a secured loan or by reducing your loan amount. Typically (almost always) your credit history is checked when you apply for a loan so that the lender can validate your credit rating. This is one of the most important factors for a lenderto consider when deciding whether to offer you a loan. If your application is accepted, you will receive a pre-approved amount of money that you’ll typically pay back in monthly instalments over an agreed period of time.
Having a bad credit rating doesn’t mean you are a financial disaster, but missing payments on other loans against you is a guaranteed way to get placed on the credit blacklist. Other events (such as divorce) can have a negative affect. Even the most unlikely person could have a bad credit rating – you might be too young, or just may not have had any form of credit before. How am I to get a credit rating if nobody will give me credit? Many people ask this…
If the better lenders don’t want to give you credit, you need to concentrate on firms that offer bad credit loans. Some lenders specialise in this type of loan, which is designed for people other lenders may not want to deal with because of their poor or non-existant credit history.
These lenders generally specialise in making bad credit loans that are substandard by normal banking criteria, and that the traditional banking community passes up because the borrowers’ previous credit is poor or there is not enough collateral.
Since these lenders make these substandard loans, the finance community allows them to charge much higher interest rates than regular banks can charge.
Although certain lenders make bad credit loans that other lenders won’t approve, each has its own acceptable criteria. One major advantage of using alternative sources of capital is that they may make you a loan when no one else will. And, of course the drawback is that you will pay a very high interest rate for the privilege of borrowing.
Note – interest rates on bad credit loans can be higher than other personal loans because of the potential risks to lenders, but they are a readily available alternative source of funding for people affected by poor credit ratings.
Traditional banks may be more selective of their loan applicants since banks tend to be more cautious of their investments. Traditional banks are less likely to offer loans to those with bad credit ratings, you might need to prove that you can repay the loan.