A Primer on Bad Credit Loans |
By Corey Senn |
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Once upon a time, the term "bad credit loan" was thought to be a
dead end situation. Today, with Americans carrying more debt
than ever before, bad credit is often a way of life for millions
of Americans. In fact, recent studies have estimated that 20% of
Americans would fall under the category of "bad credit
borrowers." While this is obviously not an ideal situation for
borrowers, it has become a fact of life for many. These
borrowers must turn to bad credit loans for home purchases,
refinancing, home equity lines of credit.
The term bad
credit loan is actually a generic term for a sub prime or a hard
money loan. Bad Credit Lenders are going to have a higher APR
that a traditional or conforming bank loan, owing to the greater
risk that a borrower poses. Bad Credit Loan Lenders always have
a minimum loan amount, some as low as 5K and others as much as
100K. Bad credit loan terms vary as well, anywhere from 2-20
years.
Bad credit loans are typically secured with
existing equity in real estate, although this may not always be
required. Often times, 25% equity is required for a lender to
make a bad credit loan. Unsecured bad credit loans do not
require equity or security against the loan.
There are
many sources for bad credit loans. The first example is for
small loan amounts and is known as a check advance -- often
referred to as a payday loan. In this case, the borrower issues
a check against which the lender offers a bad credit loan. For
larger bad credit loans, a more traditional loan process will
occur -- with disclosure docs etc. These loans may take up to
three weeks to process, although a private loan can take place
as quickly as four days.
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