Applying for a loan demands significant steps to follow from the borrowers’ point of view. They have to pursue the procedure set by the lender. Moreover, when it comes to the lender, you know that both the options of traditional and online lending firms are open.
There is one thing on which any lender tends to look very specific. We are talking about the applicant’s credit history. Yes, credit score holds a crucial spot in the lending procedure, whether it is offline or online. Lenders want to go through the past of the applicants to judge their suitability and eligibility for the loans.
Individuals with good credit history can have a joy ride, as every loan lender wants to fund their financial necessities. These people have a higher credibility ratio, which attracts everyone. There is a completely changed picture when someone has a poor credit history. Yes, it is like a blot on your financial profile, and most lending institutions fail to believe in your financial capacity.
At the same time, there is a twist in it. Your bad credit past may have down your creditworthiness, but it becomes a means of getting a specialised loan. Here, we are pointing to a poor credit history loan.
What is a Poor Credit History Loan?
This loan is also provided with names like bad credit loans, poor credit loans, loans for people with bad credit and many more. Despite the multiple names, the primary motive of these loans is to fund the financial requirements and aspirations of those individuals who suffer from bad credit scores or histories.
As these are specialised loan products, you should treat them as short-term loans available for a smaller duration. Everything will be under the control of the borrowers, but the interest rates remain on the higher side. However, you can also keep this one within your control by making a good selection of the lender or perhaps choosing the online lender.
Poor credit history loans are unsecured, which means borrowers have no compulsion to put an asset as loan collateral. There are many such specialities of these loans, which we will discuss now in this blog.
What are the Salient Features of a Poor Credit History Loan?
Such a bad credit loan holds various features for the aspirants. The reason is simple i.e. borrowers want funds despite their poor credit history. Therefore, lenders have to provide loans with special features which should be different from other standard loan options.
- Soft credit check: Perhaps the most vital loan feature is the soft credit check. If you have been keeping an eye on the activities of the UK’s loan marketplace, you must know that there are two types of credit checks: hard and soft. Online lenders usually do soft credit checks to prepare an affordable loan deal for a loan seeker. It does not leave a search footprint to their credit profile.
- Flexible Repayments: Such kind of short-term loan usually involves flexible repayment terms. It means you can choose the term from 12 months to 36 months. You can decide on this after analysing your actual needs and capacity to repay. Make sure you pay back each loan instalment on time without losing any payment.
- Online Loan Process: The best way to get these loans on flexible norms is to apply online. Banks may provide these, but they have their set procedures, which may take time. It has been found that most individuals go for these loans when they are going through financial urgencies. Therefore, online loans for poor credit are much more suitable options.
What are the Benefits of a Poor Credit History Loan?
When features are as such, then there should be many advantages of poor credit loans. Before explaining them, we want to inform you that you can use these loans for both personal and business purposes. Online lenders like 24cashfinances have made the availability of poor credit history loans for self-employed or start-up businesses.
- Criteria go beyond past credit: You know that these loans are meant for those with low credit scores. Therefore, the criteria to qualify for them do not involve only the credit scores. Instead, it involves other factors, particularly the applicant’s monthly income and their affordability.
- Higher loan approval chances: Since these are dedicated loans for individuals with less-than-perfect history, there is always a chance of higher loan approval. However, you need to prove your affordability and capacity to repay the borrowed amount.
- Least Obligations to follow: One of the key advantages of these loans for people with bad credit is the involvement of minimum obligations. Online lenders do not ask you to submit an asset to secure a loan or bring a person to take your guarantee. These are affordable loans and are based on your own capacity.
- Competitive interest rates: Many lenders in the UK loan marketplace are now providing these loans. As a result, there is mounting competition between the lenders, and it is the benefit of the loan seekers. They can get competitive rates of interest by comparing various deals to choose the most appropriate one.
What are the Disadvantages of a Poor Credit History Loan?
There is not even a single loan available with no disadvantage at all. These loans with bad credit are not the exception. They also include some disadvantages, which you cannot ignore. Let us look at them.
- High interest rates: You have to accept the fact that these short-term loans have higher interest rates. The main culprit is your poor credit score. The lender is still there to help you with affordable rates, but still, they will be higher than any other standard loan option.
- Possibility of debt trap: The availability of these specialised funding products is quite there in the UK. Therefore, it may become your habit to apply for them repeatedly. It may be a risk as you can find yourself getting trapped in unnecessary debts.
- Only a small amount to borrow: There is another disadvantage with these loans, which is that you cannot get a larger amount to avail. Lenders are in no mood to take the risk of funding a significant amount to those with poor credit histories.
Conclusion
Poor credit history loans have all the features and advantages to help individuals in their critical financial times. Yes, it is right that these loans have disadvantages or risks, too, but you cannot ignore the assistance that these loans bring to you.
As the borrower, one thing on which you should stay firmly is to get affordable loans only. It is good for you and your lender as well. By doing this, you can repay the whole borrowing amount and later bring much-needed improvement in your credit scores.