Getting a personal loan with low credit scores and bad credit ratings is a difficult task. Most banks and financial institutions would actually not want to grant loans to such bad credit applicants, in the fear that, the bad credit may turn into bad debt, if the borrower is unable to service the loan. In their desperation to overcome the emergency they are presently into, they might end up taking personal loans at exorbitant rates. Little do they realize that instead of improving their financial status these steep ARR’s also deepen their worries.
People who are opting for bad credit personal loan need to pay a price for their bad credit history. Most of the times, the price is the hefty rate of interest. These financial institutions would basically charge you steep rates of interest as they are afraid of the loan turning into bad debt and would like to be compensated for the risk taken by them.
Most banks or financial institutions are actually known to lend out on rates of interest that are divided into slabs. It is often seen, that when you are taking a personal loan for a small amount, the ARR applicable is much higher than in the case of a bigger amount of personal loan. In such cases, while opting for a personal loan it would be prudent to actually see the slab and decide whether you can borrow a slightly larger amount of money and lower the rate of interest applicable.
There are many others factors that determine the rate of interest like the repayment period and whether you are coming in with a guarantor or a security deposit as guarantee. Check them before signing on the dotted line.