DIRECT LENDERS: A SOLUTION TO BAD CREDIT?
One phenomenon caused by the decline in economic stability is the risk of having poor credit. Poor or bad credit is what describes an individual’s credit history as having a high credit risk. This happens when an individual, because of high credit checks, is discovered to have a low credit score. In other words, bad credit is a record of past failures to keep up with payments on credit arrangements, resulting in the inability to get approved for new credit.
Having bad credit indicates that one is a high risk borrower and it makes it increasingly difficult for loan applications of any kind to be approved by the bank, or even getting a new line of credit. When this happens, such a person is left at the mercy of direct lenders. Direct lending can be said to be a form of corporate debt provision where lenders provide loans to different companies in the absence of intermediaries such as an investment bank, broker or a private equity firm.
What are the options?
Bad credit loans with direct lenders let an individual have two options on the kind of loan they can apply for. There are unsecured bad credit loans, and the secured credit loans. Typical unsecured bad credit loans include student loans, personal installment loans etc. An unsecured loan is one wherein the borrowers sign a contract and promise to repay according to the terms of the loan lenders. If they fail to repay their loan, the lender can seek for the repayment of the loan through legal means. A secured credit loan on the other hand, seeks that the borrower uses a valuable item as collateral to “secure” the loan.
Some direct lenders promise guaranteed approvals for bad credit loans. For example, one option is the type of loan better known as cash advance, created precisely for raising funds quickly without the stress of extensive formalities. This kind of loan is one that is cost-effective and is a very helpful tool to consolidate public finances. Also, if it is repaid on time, it can help repair credit history.
It must be noted, however, that some direct lending corporations that promise online installment loans without the necessary checks on bank accounts or other details often have ulterior motives. Sometimes, they even give interest rates so low that it seems too good to be true. For instance, it isn’t logical to lend money to someone whom you are not sure if he/she has the capacity to pay back. Most times, these lenders ask for processing fees to be wired to them, to process the loan without any result at the end of the day. At the very best, the borrower would receive a fake money order.
Main factors to consider
The reason most direct lenders have such a high interest rate is because they mostly lend directly from their own funds. Mortgage lenders, for instance, could source for funds either from their own pockets, or even borrow money from banks at a lower interest rate. Since they would like to get their money back and also make good profits, the interest rate on borrowed money has to be increased to a reasonable level.
While there can be emergency cases, instances where one has to borrow money urgently either to pay off large hospital bills, university fees or the likes, it is very important to keep a credit score that is reasonably okay. It’s best to have a good credit score to avoid being stranded when trying to get new credit. Need more info? Call us today or fill out the form and we’ll get back to you!