While having a bad credit record certainly puts you at a disadvantage when if comes to borrowing money, there are some lenders who have devised ways of protecting themselves should they give you a loan on which you eventually have to default. This kind of loan is known as a bad credit secured loan.
Applying for a bad credit secured loan is very similar to applying for other loans, but a bad credit secured loan will require you to have collateral, whether your equity in your home or some other property, or which the lenders can take possession should you fail to pay the loan back.
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How You Can Get Hurt
Most companies offering bad credit secured loans will, because you are considered a high risk loan candidate, charge you a much higher interest rate on your bad credit secured loan than they do on their loans to more creditworthy borrowers. And you should never agree to a bad credit secured loan without being absolutely certain that, even with its high interest rates, you'll be able to keep current on your payments. If you start missing them, you could very easily see the lender put your home in foreclosure.
What this means is that you will usually have to come up with the entire sum needed to pay off the loan, and the costs of the foreclosure proceedings, or the lender can sell your property and all you will get is whatever is left after the lender has been paid back.
The Upside
As frightening as that sounds, there still may be cases when assuming a bad credit secured loan may work to your advantage. If you use the proceeds of the loan to erase your existing debts, your credit rating will improve dramatically. By keeping up with your payments on the bad credit secured loan, you can improve it even further. A bad credit secured loan, handled responsibly, can be your ticket to a much brighter financial future.
The biggest drawback of a bad credit secured loan [http://personalbadcreditloanshelp.com/Articles/Bad_Credit_Equity_Loan.php] is, of course, its high interest rate. Lenders, however, are justified in charging more to loan money to those with troubled financial pasts, because they are taking on a high risk.
And, if you have considered a bad credit secured loan as a possible answer to your financial dilemma, and want to pursue the idea, you will do yourself a big favor by going over the terms of any loan offer with a fine-toothed comb. There is an unfortunate number of loan companies ready to snatch your property from you at the first excuse, so do not agree to borrow money from any lender whose background and contracts you have not thoroughly researched.
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