Applying for a loan is generally divided into three stages. The first stage involves preliminary application where you specify the amount required explaining the need for your loan and the supporting documents. For the screening of your application, you are required to undergo a credit assessment. The Assessment checks your previous loans, the installments paid and default in payment. Based on these parameters, your credit score is generated. If your credit score is poor, banks refrain from providing you any money. This is when you can apply for ‘poor credit loans’, a loan which is independent of your credit score. Know more about this on Credova Finance.
How does it work?
Poor credit loans work in similar fashion to conventional loans. A conventional loan is disbursed into your account after checking your credit score. Your loan is approved only if your credit score is strong. In the case of poor credit loans,your loan is approved even without your credit rating is strong. You have to fill out an initial application with the intent of taking the loan. This application is then checked for discrepancies and loan is instantly approved. Some loan providers may instantly credit the amount within 60 minutes of your loan being approved.
After the loan is disbursed, an amount is decided upon as your monthly installment which is debited directly from your account.
Advantages of Poor Credit loans
Such loans are independent of your credit history and are mostly approved instantly. This can help you get important funds for your daily requirement. This ensures that your day-to-day activities are not hampered.
One major advantage of taking these loans is that, once you start repaying your dues, your credit scores start improving significantly.
Disadvantages of Poor Credit Loans
Poor Credit Loans often come with a higher rate of interests as compared to conventional loans. This means that repaying these loans is more difficult, which increases your risk of credit. One must calculate the amount to repay and compare it with their inflow of money to avoid future hassles. One may get stuck in the vicious cycle of loan and repayment, and continuously take loans to repay the previous ones. It is important that one understands that taking a loan is lending money for temporary use and that you have to repay back a higher amount.
It is important that you verify your lender before applying for such loans. If your lender is not reputable, your poor credit loans will add a more financial burden on your shoulders.