October 9, 2021
Are you unable to get a loan due to a lack of a good credit score? Then do not worry, as you can apply for a bad credit loan. Perhaps you have heard about such type of loan but merely know the pros and cons of such a loan.
When a person is in huge requirement of money but unable to get the loan due to a low credit score, he hardly gets any monetary help from lenders. However, after analysing the worst situation of those borrowers, a new type of loan has come into existence. It is known as a bad credit loan.
Generally, from the very term, it is not difficult to understand that a borrower needs not to represent a good credit score in order to borrow such a loan. Instead, a person can also apply for a loan even if he does not have a good credit score. Actually, it is more like a personal loan which is easy to repay through uniform monthly instalments.
So, what are you thinking about? Take out for online loans even for bad credit from the direct lenders of Ireland. However, prior to that, let us know the pros and cons of borrowing money.
Advantages of borrowing Bad Credit Loan
When you are in the urgent necessity of funds, then even if the interest rate is high, it hardly matters. In order to solve necessary requirements, you will only search for a lender who will approve the loan. However, on that note, a bad credit loan is very much beneficial. Some of the compelling advantages of bad credit loans include,
- Approves on same day
Basically, the lenders of bad credit loans offer borrowers a completely online process. Due to the online process, it takes minimum time to approve the loan. The loan application is entirely paperless, and each and every form is available in only soft copy.
For this reason, whenever a borrower submits the loan application is directly submitted to the lender. There is no third party between a borrower and lender. So, same day approval is quite simple.
- Competitive rate of interest
When it comes to the matter of rate of interest, there is no need to worry. This is because the rate of interest is comparatively lower than the rate applicable for a credit card. When you have a credit card and apply for a loan through that card, money lenders will charge a high-interest rate. Moreover, there are some hidden charges too.
On the contrary, a bad credit loan comes with a low rate, and a borrower needs not repay a huge amount of money.
- Flexible repayment tenure
Usually, bad credit loans are short term borrowing that does not offer a more extended repayment period. Most of the money lenders would like to get the entire repayment within 1-2 years. However, by analysing the habit of different money lenders, we have noticed that a minimum 1 year and a maximum of 5 years is the repayment tenure of a bad credit loan.
- Debt consolidation
Many borrowers use such bad credit loans for the purpose of debt consolidation. Generally, borrowers who borrowed money from multiple lenders were unable to repay those outstanding than his credit score hampers. As a result, credit score continuously drops.
So, some borrowers who have become defaulters are primarily used to borrow bad credit loans and repay all the outstanding debts. As a result, it has become a nice way to consolidate debts. It can bring back the lost credit score also.
Disadvantages of borrowing Bad Credit Loan
Unlike any other loan, it also has some downsides. It is better to know them before borrowing a bad credit loan. Some of the disadvantages include,
- The high amount of penalty
Before you borrow, make sure you know about the penalties. Generally, people who are in urgent need of funds apply for such a loan. Therefore, people hardly notice the actual rate of interest and how many monthly instalments he needs to pay.
However, after handling the emergency situation, when the borrower looks at the monthly instalments and if found higher than ability, it creates a problem. Moreover, even a single repayment miss can cost you high as the lender charges penalty.
- It is a secured loan
Generally, this type of loan is a secured loan which often causes collateral risks. Perhaps you think that at the beginning of this blog, we have been told that it is a personal loan and such loan is not at all a secured one. Yes, that is entirely true, but do you know it comes under the personal secured loan category?
A lender never wants to take over a considerable risk. Obviously, lending money whose credit score is not up to the mark and even entangled with outstanding money here and there so, lenders may want securities. Therefore, to get the loan, the borrower needs to keep something as a security.
Therefore, these are some fundamental disadvantages of borrowing money through a bad credit loan. Therefore, you may borrow payday loans from direct lenders in Ireland instead of applying for a bad credit loan.