[Pidgin] #15136: Should You Take Out A Loan With Bad Credit

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#15136: Should You Take Out A Loan With Bad Credit
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 Reporter:  bomwesoly  |     Owner:  bleeter
     Type:  defect     |    Status:  new    
Component:  privacy    |   Version:  2.10.3 
 Keywords:             |  
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 Taking out a loan when you have bad credit, and if you are trying to
 rebuild your credit after financial difficulty, you may be wondering if
 taking out a loan at this time could cause your credit score to worsen.
 The fact of the matter is that there are bad credit loans that are written
 for those individuals who have experienced a difficulty in their borrowing
 past and are now trying to rebuild their credit file. And these loans can
 actually help you accomplish the task of rebuilding your credit if you are
 a responsible borrower and follow good repayment practices.

  Types Of Loans For Bad Credit

  There are two basic types of loans that those with bad credit can take
 out. The first of these is the secured loan, or secured personal loan.
 This loan is written out based on the ability of the borrower to pledge
 collateral. Collateral is simply something of value that you allow the
 lender t o https://support.freenas.org/ticket/1539 place a lien upon until
 the loan is repaid, like a car or home. Pledging collateral gives the
 lender an added layer of security that despite your bad credit in the
 past, you will make good on your promise to pay; if you fail to pay, the
 lender can sell the collateral to apply toward repayment.

  The other type of loan is the unsecured loan. This type of loan is one
 that is taken out without collateral pledged, and is riskier for the
 lender. Because you are not providing extra security, the lender is at a
 greater risk, and may compensate by charging extra fees or by charging
 more interest on the principal amount that you borrow. You may be asked to
 apply with a cosigner for unsecured personal loans when you have bad
 credit.

  Borrowing Limits

  Because you have bad credit, you will usually not qualify for more than
 $5,000 with a lender until you have established yourself as a good
 borrower with them. You can borrow smaller amounts of course, beginning at
 around $300. You will typically be asked to repay the lender in monthly
 payments over the course of 12 months to 24 months.

  Building Your Credit With A Bad Credit Loan

  When you are approved for your bad credit loan, the time is right for you
 to become a responsible borrower and thus a good steward of your credit.
 To become the type of borrower that lenders seek for their loan products,
 the most important thing that you can do is pay your loan payment on time
 each and every month, and in turn, the lender will report your positive
 credit behavior to the credit reporting bureaus, which can raise your
 credit score. If you are sending a payment via U.S. mail, allow ten days
 for the payment to travel by mail and be processed.

  A better way is to set up online payments or automatic payments that are
 taken from your checking account each month on a certain day. Being late
 on just one loan payment with your bad credit loan can cause your credit
 score to become even lower.

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