Building Better Credit With a Secured Bad Credit Loan


One of the first things you will notice while applying for a loan is just how much the lender will scrutinize your credit history. This is not to insult you or belittle you; it is merely a way to determine the risk factor. With a secured bad credit loan the lender already knows that you are a risk, and this is why you have chosen this route.

Collateral and its value will play a major role in the approval of the loan you seek. Common rule of thumb to be applied, is that the value of the collateral must be the same or greater than the value of the loan. This is the security for the lender, and ensures that they will be able to regain the funds in the event of a default on your behalf.

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How This Loan Helps Your Credit

When you already know your credit is poor; you had to choose a lender that will work with you to help you rebuild your credit and give you a chance. Banks and other large firms may not offer you a loan due to the high risk of default or continually late payments. By choosing to offer up collateral for a secured bad credit loan, you increase your chances of approval.

Once the details have been worked out in regards to the loans terms and conditions, it will be up to you to make sure you abide by them. Paying the payments on the loan on time, will not only ensure that you do not loose your property to the lender it will bring your credit points up as well. By the end of the loan term, you could actually see a significant increase in your credit score. This is an obvious advantage to you, and will make applying for a loan in the future easier.

Building For The Future

When you apply for a secured bad credit loan, you know the risks to your property should you fail to payback the loan. This will give you a strong incentive to make timely payments, building a structure of bill payments for you to follow in the future. Not only will this help you gain the needed funds now, it will lead you away from poor practice that perhaps brought you to this situation. As your credit score goes up in points, so to does the level of acceptance from other lenders for a future loan.

This will make applying for a loan less daunting at a later date, as you have already had this prior loan under your belt as a form of good measure. If your credit is in very poor condition, it may not be out of the question for a lender once again to ask for collateral should you apply for another loan. The lender of the secured bad credit loan that you already paid off would be a good lender to apply with again. This is because they are already familiar with your situation, and will be more willing to accept you a second time around.

Once again if you repay the loan as directed, you will see another dramatic increase in your credit score. This can easily bring a once tarnished history to a respectable level where collateral may not be required in the future.


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