What are bad credit secured loans?
Secured loans are where the borrower gets loan based on the value of the property or asset which is pledged. The process of pledging a property or asset as surety with the lender is called as Hypothecation. This bad credit secured loans are provided by the lenders against the security. In case the borrower doesn’t repay back the amount, then the lender has all the rights to seize the property and sell it in order to cover the original loan amount. The property or asset is put with the lender to secure the loan amount.
Why should a person with a bad credit score have to take secured loans?
There are quite many reasons for people with bad credit scores choose secured loans, few of them are mentioned below
1. Improves credit score: Even with no credit score, you can avail of the loan and then improve the credit score with regular repayment of money and keeping the debt amount low. This will let you improve the credit score and can apply for future loans easily.
2. Borrowing a higher amount: While availing the loan, the borrower can take higher borrowings from the lender and can be used for various purposes. The lender will not ask the reasons for taking the loan amount. As it is secured against a property, the lender can give large borrowings to the borrower.
3. No credit check: The reason people with bad credit scores apply for this loan type because the lenders do not check the credit score for bad credit secured loans and give the loans based on the asset value and trustworthiness.
4. Secured loan: They are a lot safer than other loans as it is secured against a property and you don’t have to worry about the asset being sold without your consent.
Features of bad credit secured loans
1. You can get the loan amount at lower interest rates. Secured loans are more favorable to the borrowers as the interest rate on these loans is lower compared to unsecured loans.
2. The whole repayment process of a secured loan is made in a convenient way and in favour of the borrower. The borrower can pay the loan amount as per his convenient.
3. The borrower has the right to choose the interest rate pattern i.e. Fixed interest rate or floating interest rate.
- Fixed interest rate: It is where the interest rate paid by the borrower every month is fixed for the whole loan tenure period.
- Floating interest rate: It is also known as variable interest rates and this keeps on changing over the whole tenure period and it is not constant.
4. Even with a low credit score, the borrower can still apply for the secured loan by providing collateral and by paying the amount on a regular basis.
5. It is easy for the borrower to get approval for such type of loan. They do not require too much documentation and are approved quick without much delay.