What is bad Credit Loans Guaranteed Approval?
If you are searching the definition of Bad Credit Loans Guaranteed Approval then you should know first what bad credit is. Bad credit is a score set by Fair Isaac Corporation (FICO), there are 8 scales, among them one should be used by the lender at the time of borrow. The scale generally lies between 300 to 850, but below 670 are called bad credit.
Any borrower with a bad credit score should pledge collateral such as property or gold at the time of borrowing. The cause of giving collateral is it can give the borrower a better rate of interest when he or she approves a loan from the lender. This entire procedure can be called as bad credit loans guaranteed approval.
Basic Information about Bad Credit Loan
Bad credit loans guaranteed approval describes the credibility with very higher credit risk as the borrower has a lower or bad credit score. Although it is not enough to prove that the borrower has no intention to pay his/ her liabilities if he/she has a bad credit score. There may be some genuine reason behind the delayed payment or settlement or default. Often a person who is passing through a rocky road or challenging period fails to make a payment on the scheduled time. Though the bank does not consider this type of failure.
Bad credit loans can be generated after understanding the borrower’s previous payment detail. If a borrower has delayed in some payments, the lender’s system will allow him or her to take a smaller amount of loan. This whole process will help the borrower to re-create a perfect credit history and after that approval of a big amount of loan will be easier in the future.
The reason behind the bad credit score
Bad credit loans guaranteed approval is given to individuals who have a bad credit score. There may be several reasons for which borrowers may get a bad credit score:
• When a borrower has missed or delayed the payments or not able to pay the loan payment in time.
• If the borrower has too many credit inquiries or transactions from various lending institutions then the credit score can be decreased with each inquiry or transaction.
• If the borrower has less or imperfect credit history from any lending institution, that means the borrower is New to Credit (NTC) customer.
• If the credit card utilization of the borrower is high and he or she is serving it with a minimum payment amount may have a bad credit score.
Drawbacks of a bad credit score
Lenders are less likely to provide bad credit loans guaranteed approval because the bad credit holders already have a bad impact of delaying the loan payments and there is a possibility of delaying in payments in a new loan approval. For this reason, getting a credit card or loan approval may seem difficult for bad credit holders. Therefore many banks and Non-Banking Financial Companies (NBFC) can refuse loan approval to the bad credit score holders. Although there are many lenders such as Lending Club, Peerform, Avant, etc. in the US who provide loans even if anyone has a low credit score. As long as the borrower has no defaults after 2012, he or she can apply for loan approval to rebuild the credit history and later can apply for a higher loan amount.
Some services offer personal loans to the bad credit holders, which are actually easier to get if the borrower has a lower average credit score. These bad credit loans must be backed by collateral or asset like home or gold or car, though the loan typically has lower Annual Percentage Rates (APRs).