Instant decision loans aren’t offered on the basis of conventional lending wisdom. Although some lenders only provide loans for bad credit when supported with collateral, this isn’t always necessary. Much depends upon the applicant’s employment status and how much money they wish to borrow. The provision of security allows that person to get acceptance when they wouldn’t otherwise be eligible. Whether this is a good thing or not depends upon personal circumstances just a month later.
Who Offers Instant Bad Credit Loans?
Secured and unsecured loans for tenants and homeowners are granted by payday companies, pawnbrokers, car title loan lenders and credit unions. They involve no credit scoring at any stage of the application process. Performing a credit check would be folly as very few customers would ever receive approval. The problem with not performing credit checks is that it leads to a higher default rate and customers all pay a flat rate, regardless of status.
Cost of Instant Decision Loans for Bad Credit
- A guaranteed bad credit loan for $700 in Nevada results in the need to repay $857.50 just 30-days later. The typical APR is 273.75%. Source: PayDay1One.
- In California, the maximum size of an unsecured loan for tenants is set by law at $260. This equates to a maximum APR of 212.92%. Source: Spotya.com.
A number of American states have placed an upper limit on the the amount that can be borrowed. Fifteen states, as well as Washington DC, have placed a cap on the maximum APR that can be charged. There aren’t any restrictions on instant bad credit loans in the UK.
Why Poor Credit History Loans are So Expensive
- Lenders face a far higher default risk as the bulk of applicants have already been rejected by the banks because of their repayment history.
- Poor credit history loans are also short which leaves the lender with less time to recover their administrative costs.
Growth Poor Credit Payday Loan Lending
The popularity of loans for bad credit has risen considerably in recent years. Many people have lost their jobs or failed to keep-up with the repayment on existing credit agreements so have nowhere else to turn. According to Fredrika Schouten of the USA Today “The number of payday lending stores has doubled to more than 22,000 in the past decade.” Whilst this is perceived as a bad thing by critics, bad credit lenders assist customers who have been rejected by mainstream banks and lenders.
Pros and Cons of Guaranteed Bad Credit Loans
Instant decision loans are granted to a section of the community that has long since been abandoned by the banking sector. An any-purpose quick cash advance could be granted to an applicant with a history of adverse credit. This could help pay the rent or fix a car, thus allowing that person to keep a roof over his head or keep their job. The main criticism against poor credit history loans is the usury cost of borrowing makes it difficult to clear the debt and may exacerbate financial difficulties.