It seems that with the credit crunch that is still prevalent in our country, many would-be borrowers with not so perfect credit are being left out and cannot qualify for the loans that they need. There are lenders who are still processing loans for those with less than stellar credit performances, and you can qualify for the loan that you need. Just announced action by the Federal Reserve has loosened some of the formerly stricter guidelines that many banks had been using to determine the creditworthiness of all borrowers.
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What This Means for Those with Bad Credit
The Federal Reserve has just launched a $200 billion dollar consumer credit program that is aimed at boosting the availability of credit for more borrowers. What this means for those with not so perfect credit is an improved chance at getting the loan that they are looking for.
Types of Bad Credit Loans Available
Bad credit loans can be either secured or unsecured. The secured version is one that is obtained when you pledge collateral that the bank or lending institution can hold as security against the amount of money that is extended to you. Although they are written at typically lower rates of interest because the bank assumes less risk when writing them, the bank can seize your collateral and sell it to make itself whole if you do not follow through with the loan agreement.
An unsecured bad credit loan does not require that you pledge collateral and costs more in terms of interest charges because the bank or lender assumes a greater risk. However, it does not require that you risk any of your assets to obtain the loan that you need. Oftentimes, especially if you need to borrow a larger amount of money, you can improve your odds of being approved if you apply alongside a cosigner who agrees to stand responsible for the loan principle if you fail to honor your loan agreement. To be considered, your cosigner should be someone who has a good credit score and adequate income to repay the lender.
Choosing a Bad Credit Loan Servicer
There are lots of lenders who service bad credit loans, and with the newly launched consumer credit program, there are bound to be even more joining the flock. Because your status as a bad credit borrower causes an immediate increase in the traditional interest rates that you will be charged, finding a lender who will write a reasonable rate is essential.
The lowest rates can usually be found with online lenders who have more working capital and thus more money to lend as compared to a brick and mortar banking institution or credit union. Always review the terms of your bad credit loan carefully, and be certain to accept a bad credit loan that features payments that you can handle easily with your current income.
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