Adverse Credit Loans & Credit History

By: James Copper

For a variety of reasons, whether it is youthful foolishness, unexpected job loss, loss of employed spouse in a one-income house or severe medical problems, people get into debt and ruin their credit history.

They then find themselves in trouble with the bills they have already accrued and things just get financially worse. For those who want to get out of debt and repair their credit there is help in the form of adverse credit loans.

These loans usually cost more than those given out to borrowers with good credit. The interest rates are higher because the lender assumes more risk. With some help or a little careful searching you can find adverse credit loans whose rates are not adverse as well.

It is easier, for example, to get a better rate on a poor credit loan, if you have paid back or settled the bills that gave you the poor credit history in the first place.

The trick that makes the financially positive difference for the borrower is that she or he take on these adverse credit loans and then pay them back on time. In other words, the consumer must not miss or be late with even one payment.

Adverse credit loans have far stricter repayment expectations than standard loans to those with good credit scores. Miss one payment on a bad credit loan and your rate will go up, and you may even be facing a foreclosure.

No matter how low or high that interest rate on the adverse credit loans you are considering there are a few things you should be cautious of. If you can, avoid adverse credit loans that include late payment increases.

Lenders have discovered recently that they may in fact make more money just raising adverse loan rates for late or missed payments rather than hurrying to foreclose. While the ideal is to never miss a payment, you would be wise as a consumer to avoid bad credit loans that have this stipulation.

Avoid if you possibly can poor credit loans - or any type of mortgage or other loan, for that matter - that has a clause allowing for a prepayment penalty. If you are trying to get yourself out of debt it makes no sense to sign on the dotted line of a plan that says if you can pay your bill early it will cost you more. That is essentially what a prepayment penalty is.

This penalty means that is you pay more than you are required to do so each month or even one time only so that your balance is paid prior to the predetermined end of the loan you will incur additional fees and charges. Besides, who wants to do business with a lender who wants to get rich off of your misfortune?

Bad credit loans can have balloon payments built in. What this means is that you make an attractively low payment for a considerable period of the loan but then you are required to make a huge payment of the balance at the end of the loan period.

This makes no sense. If you were able to make a huge payment you would not have needed to look into adverse credit loans in the first place.

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