Instant decision loans aren't offered to customers on the basis of conventional lending wisdom. Despite the fact that some lenders only provide cash loans for bad credit when supported with collateral, this isn't always necessary. A lot depends upon the applicant's employment status and how much money they wish to borrow.
The provision of security enables you to get acceptance when you wouldn't otherwise be eligible. Whether this is a good thing depends upon your personal circumstances just one calendar month later. You need to pay your bills, but borrowing money with poor credit comes at a price.
Who Offers Instant Bad Credit Loans?
Secured and unsecured loans for tenants and homeowners are granted by payday companies, pawnbrokers, car title loan lenders and credit unions. They involve no credit scoring at any stage of the application process. Performing a credit check would be folly as very few customers would ever receive approval. The problem with not performing credit checks is that it leads to a higher default rate so customers all pay a flat rate, regardless of status.
Cost of Instant Decision Loans for Bad Credit
- A guaranteed bad credit loan for $700 in Nevada results in the need to repay $857.50 just 30 days later. The typical APR is 273.75%.
- In California, the maximum size of an unsecured loan for tenants is set by law at $260. This equates to a maximum APR of 212.92%.
Many American states have placed an upper limit on the the amount that can be borrowed. Fifteen states, as well as Washington DC, have placed a cap on the maximum APR that the customer can be charged. There aren't any restrictions on instant bad credit loans in the UK.
Why Poor Credit History Loans are So Expensive
- Lenders face a far higher default risk because the bulk of applicants have already been rejected by the banks due to their unreliable repayment history.
- Poor credit history loans are also short which leaves the lender with less time to earn interest and recover their administrative costs.
Growth of Poor Credit Payday Loan Lending
The popularity of loans for bad credit has risen considerably in recent years. Many people have lost their jobs or failed to keep-up with the repayments on existing credit agreements have nowhere else to turn. According to Fredrika Schouten of the USA Today "The number of payday lending stores has doubled to more than 22,000 in the past decade." Although critics construe this negatively, bad credit lenders help customers who've been rejected elsewhere.
Pros and Cons of Guaranteed Bad Credit Loans
Instant decision loans are granted to a section of the community that has been abandoned by the banking sector. A quick cash advance could help pay the rent or fix a car. The main criticism is that the usury cost of borrowing makes it difficult to clear the debt and may exacerbate your financial difficulties.
Sources:
- Schouten, Fredrika. (20 April, 2010) "Payday lenders lobby for regulation exemption." USA Today.
- "Loan costs and terms." PayDay1One.com.
- "California Payday Loan Fee, Rates, and Terms." Spotya.com
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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