The financial crisis that hit the World a few years ago has had an effect on most people, every country, even China, and the consequences are still being felt. Many countries, several in Europe and some whose development has stalled such as India are going through a difficult period. Individuals in need of finance have their own problems; a poor credit score and bad credit loans the only option.
If many famous financial institutions didn’t see the problems coming it is not surprising that the average man or woman didn’t either. There has been a tendency to live on credit in recent times; it has been so easy to get finance to buy something with payments spread over a number of months, or to use a credit card to do a similar thing.
It is almost as if tomorrow never comes; unfortunately it came. It brought repossession, unemployment, default and withdrawal of credit cards to many households. It has been a sharp lesson and the impact continues.
Not everyone lost their home by any means and obviously the vast majority have stayed in employment but the whole financial scene has changed. Credit card companies used to be delighted to hand out their cards to everyone, to encourage spending and to increase credit limits even when the holder did not request it.
There was less demand for bad credit loans because credit cards were regularly used for purchases and with the ability to juggle cards by accepting term 0% balance transfers, some people got into spending mode. Credit card companies were happy to see people just pay the minimum monthly amount from balances as they made money with high interest charged on outstanding balances.
When the crash came, policies changed. Families in trouble found themselves using credit cards for normal monthly expenditure if household income dropped. That was only a short term solution of course and credit limits were soon reached or indeed cut by the companies. It led to defaults and the resulting poor credit scores.
All of a sudden it was necessary to look for other avenues of finance; sometimes to pay off debt that had been incurred such as that credit card debt, sometimes for new and necessary expenditure. Bad credit loans became one source of finance. While banks have always been conservative by nature and became even more so in the new economic climate our lenders were keen to get their share of this new market.
They believed that bad credit loans could be a profitable sector and with the growth of the internet they were able to advertise their products online and accept online applications from people wanting bad credit loans.
Approvals have been dependent on applicants being able to make out a case. That case involves details of employment, backed up by checking account statements. It is basically details of how these loans can be repaid. Can the applicant make the monthly installment repayments?
It is possible to retrieve a poor credit score but in the mean time the rate of interest a lender will charge on bad credit loans reflects the risk that lender is taking against default. Lenders obviously need to use their judgment and look beyond the poor credit score for the reasons for it happening and the likelihood that it will be repeated. In many cases, people were simply caught unawares. It had never happened before and people who can demonstrate their determination that it won’t happen again are likely to be successful in their applications for bad credit loans.