A poor credit loan is a higher risk loan then usual. Lenders see a poor credit history as a sign that they may not get paid. Lenders are in the business of making money. If they think it is unlikely a borrower will pay them what they owe then they will simply not loan them money in the first place.
There is a new trend, though, in lending to people with less than perfect credit. There are two reasons for this. First, lenders know in order to get bad credit, the borrower had to have had good credit at some point. The only reason they have bad credit now is that something went wrong. Secondly, lenders see poor credit loans as a way to make more money since they can get away with charging higher interest rates and fees for such a loan.
Lenders are hoping by providing poor credit loans they can help borrowers to improve their credit. Once their credit is approved, the lender is counting on repeat business. The next loan will come with lower rates and more options, so the lender is setting themselves up for repeat business. In the world of business, the repeat customer is what every company is striving for because they are the best type of customer and will ultimately bring in more earnings for the company.
Lenders generally charge interest rates that are far higher then average for a poor credit loan. They reason that with the additional risk they should get additional money. This is also a tactic that is perfectly legal, so they can get away with it. Many times lenders go a bit too far, though. A borrower should shop around a little to see what the lowest rate is that they can get.
Poor credit loans are best for a short term loan for a small amount. Due to the higher rates and fees, a small loan is still going to be costly, but by getting it for a short term the borrower can quickly pay it off and then reap the rewards it brings. Once the loan is paid off the borrowers credit will have been improved and they will then have more borrowing options.
Poor credit loans are something that many people have to deal with. It is never fun to try to find a lender who is understanding or willing to even talk about lending to someone with poor credit, but it is a good step towards improving a poor credit history. A poor credit loan is worth looking for and is worth paying for because in the end, it is a tool to credit repair.
James Copper is a writer for http://www.any-loans.co.uk/self-certification-secured-loans.shtml where you can find information on self cert loans
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