Do bad credit loans deserve a bad reputation? Are they ethical or nor? Getting bad credit loans is not something that is hard to get nowadays but it is something that is easy to get despite the fact that the repayment period is very short. People with bad credit rating can qualify for short term loans despite the fact the interest rates might be very high. The interest rate is high because of the added risk of lending to somebody who already has failed to clear other debts with other lenders. Long term loans are only offered to people with good credit rating because the risk for such loans is low.
How risky is it to give a loan to persons with poor credit history?
It is very risky to give loans to people with poor credit history because the chances of them repaying the unsecured loans are very minimal. People with poor credit history have no option because they cannot get finances from banks and therefore they have to look for lenders who can given them loans even with bad credit history. The short term loans that you get from here are very important in emergency situations. Most of the lenders for people with bad credit history usually process loans for a very short period of time and they promise to give you money within hours. In this case these loans are ethical because they have helped in an emergency situation.
How bad credit lending came about?
Sometimes it is hard to tell who came up with the idea of giving loans to people with bad credit history. In the past most people were unable to get any financial assistance from financial institutions because of bad credit rating but when it became commonplace some lenders decided to lend money to such people but at a higher interest rate and a short repayment period. Therefore it is important for you to know that loans for bad credit are not good because of these high rates of interest. People who have no credit history also have to struggle in order to get loans because banks must see your credit history before disbursing any kind of loan to you. See more.
Do bad credit loans result to bad reputation?
It is a bad reputation when people don’t repay their loan on time or when they are in arrears. That is the reason why banks must look at your credit history before deciding to give you a loan and if they find that you are listed they advise you to go and clear yourself first. There are other scandals related to bad credit loans that have even involved very high profile people. The high interests charged on customers loans is due to bad reputation which makes the lenders feel that they are at risk.
What is required to make bad credit loans ethical?
There are rules that have established to guide the lenders regarding the giving out of payday loans. The rules states that borrowers should not repay double what they borrowed, interest rates and fees capped at 0.8% per day and default fees to be capped at $15.