Often people with bad credit rating might find it difficult to get personal loans in their name. Most lenders like banks and financial institutions consider these bad credit loan applicants as risky proposition. They are under the impression that these and credit loan applicants may turn their loan into bad debt, making them incur loss. In such cases it is important to opt for secured loans.
Secured loans are loans granted by the banks and financial institutions where the applicant comes with a security. The loan is basically given with the collateral as a security. In such cases, thanks to the collateral being in procession with the lender, they feel confident. They can always auction off the collateral and cover their losses. In such cases, banks feel more confident about approving loans to applicants with bad credit history. The collateral can come in the form of a house or share certificates or even real estate properties.
Another important benefit of collateral is that, the rate of interest or ARR applicable on the loan amount decreases the moment you come with a collateral. The bank is aware that the chance of your defaulting the loan is far lesser as your property lies with them. So the bank charges you less interest as the risk involved is far less in such cases.
Whenever you are opting for a personal loan with bad credit rating, just ensure that you study all the lenders and find the most feasible personal loan being offered after considering the fact that you are coming into the deal with a collateral. Ensure that you read the fine print carefully before signing on the dotted line as you are pledging collateral with the deal.