Poor Credit Secured Loans
If you are someone who has no credit history, or are followed around by a negative credit history, you can still obtain a poor credit secured loan. You can obtain this kind of loan in a few ways. Commonly, those seeking this type of loan sometimes end up visiting a pawn shop with an item to serve as collateral, and in turn, obtain money equivalent to the value of the item. Unfortunately, pawn shops won’t pay you a lot for what you bring them, nor do they offer you much money on items they hold for you.
If a pawn shop is holding your collateral, they’ll sell the item to get their money back. You can usually expect to get only ten percent of what your item is actually worth. The borrowing period usually lasts for two weeks, at which point you are required to buy your item back. Often, you are able to prolong this borrowing period by paying a fee. This kind of loan doesn’t mean anything towards building good credit history, as these are unreported.
If you visit a credit union or a bank, you can establish poor credit secured loans similarly. You’re usually asked to deposit a certain quantity of cash into a secured account. The financial institution holds this money for you, and in turn, you’re given a kind of credit card, such as American Express or Master-Card. You’re allowed to spend up to the amount of money you’ve initially deposited. You pay back this amount regularly, and these actions are recorded and given to a credit bureau. You can establish a positive credit history in this way. This kind of account bears similarities to a revolving credit account. Over time, you can perpetually borrow, and then repay, the amount of your initial deposit.
Certain companies that offer credit cards will also offer them to people who have not yet established a credit history. These ‘secured’ credit accounts always require that you deposit a certain amount of cash initially, which is retained. After about a year of use and building credit with this card, you should have enough credit to obtain an unsecured credit account. At this point, you’ll get your initial deposit back.
Poor credit secured loans typically mean that you’ll have to pay higher fees and interest rates, as you are considered a risk to lend to. You’ll be able to find a deal with lower rates after you’ve proven your reliability. This type of loan option is excellent to start out with because it limits your own personal risk. There is nothing wrong with having to secure your bad credit loans – it is actually a much better idea than getting an unsecured loan because the security motivates people to pay it back on time.
