The economic downturn being experienced worldwide has sent a good number of people into bad debt. It is becoming increasing difficult for ordinary citizenry to make ends meet. Failing to meet financial obligations as and when they fall due often leads to a poor credit rating. One way that is becoming incredibly popular in aiding to meet pressing financial needs such as repaying loans is to go further into debt. Borrow anew to pay off old debt. However, because you have poor credit history it is that much more difficult to get further credit. Catch 22 right? There is good news though, more and more lenders are willing to offer loans without collateral for bad credit.
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So what are unsecured loans for bad credit? These are basically personal loans that require no security and are offered to person with poor credit rating. Sounds good right? The option of unsecured loans for bad credit while seeming very attractive should be taken only after considering the following disadvantages of these types of loans.
You have poor credit rating so the banks will consider you a risky borrower. Risk is usually mitigated by security but these unsecured loans for bad credit do not require collateral to be put up against the sum borrowed. These two factors result into rather high interest rates on your unsecured loan.
As your loan is unsecured, lenders further protect themselves against possible losses by extending very limited loan amounts. Lenders will typically not offer more than a paltry £30,000 on unsecured loans for bad credit.
Perhaps one of the more attractive things about the unsecured loans for bad credit is that lenders do not require any of your assets to act as security for your loan. This is great especially if you have no assets to speak of. No creditors knocking on your door to tow away your car should you default, right? Wrong! The lender may opt to engage debt collectors who will not hesitate to stake claim on your belongings.
The high interest rates, on loans without collateral for bad credit, translate into high monthly repayments installments. The high monthly installments can be reduced by taking a loan with a longer repayment period. This however only increases the interest rate on your loan.
There are definite advantages to the unsecured loans for bad credit. The fact that these types of loans are available is a blessing for many. You can take out an unsecured loan to help you clean up your poor credit history - the money from the loan can be used to pay off older debts. On the other hand, these loans lead you further into debt and can damage your credit rating even further.
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