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Saturday 01st of August 2009
January 30, 2007

Bad Credit Loans - Who Makes Them, Who Gets Them


by Kathyrn Lang

Just how bad does credit have to before a loan company refuses a bad credit loan? Have you ever tried this tongue twister?

As hard as it is to say, it’s just as hard to answer. The difficulty lies in the fact that the question comes in two parts – the lenders and the borrowers.

The Lenders

Banks are the most conservative of the lending institutions. These companies have to justify the bottom line to investors. If the person seeking the loan has a bad credit rating (and is therefore a risk NOT to pay back the money) then the lender has to say no. It would not be considered a good investment, and that’s a bank’s business.

Credit card companies, on the flip side of this coin, are eager to lend money to people who have proven they can’t pay on time. Although the industry might deny it, much of the profits come from late fees and increased interest rates due to late payments.

So, there are lenders who see the bad credit loan as a good investment while there are lenders who tend to turn away from that direction.

The borrowers

Having a bad credit rating all comes down to how you have paid your debts in the past. A late payment will decrease your credit rating (the longer it is late, the more it will decrease the rating. Typically it is counted by 30, 60, and 90 days or longer). The more of these marks that show up on your credit history, the more it will cause you to have a bad credit rating.

I do find it irritating that you don’t get any kind of credit for early payments. It seems that the only thing that the companies are concerned about is whether their money is there the day it is suppose to be.

Another thing that is going to effect a borrower’s credit rating will be the amount of credit they currently have available. That means that is credit cards are maxed out, your credit rating will be much lower than if there was lots of money readily available to you. The irony here is that if you had the money available to you then you probably wouldn’t need the bad credit loan in the first place.

Finally, there is the issue of bankruptcy. While this procedure will severely damage your credit rating, it might actually be a benefit when trying to get a bad credit loan. In places like the United States, bankruptcy can only be used every seven years. This means a person who has filed recently will have to be responsible for their debts – there is no out for them.

There is one final thing that you need to consider when looking for a bad credit loan. If a company turns you down, then maybe you need to rethink your situation. That no could be just the thing you need to get your finances going in the right direction.

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