Consumers need a loan for a variety of reasons. Some people want to buy something like a new piece of furniture, but others need this money to pay urgent bills. No matter for what reason a loan is taken out, the customer must first prove his creditworthiness. This is crucial because if it turns out to be bad, it will be difficult to get a loan.
How is the creditworthiness checked?
The customer’s credit rating does not indicate otherwise whether the applicant is solvent enough to receive a loan. Banks therefore primarily check the salary and the Credit Bureau. The salary must be above the garnishment allowance, because only in this way can the bank issue a garnishment if the borrower no longer pays the monthly installments. Credit Bureau provides the bank with information on whether payment delays or even defaults have occurred in the near past. If this is the case or the salary is not so high, the credit rating is classified as poor. This in turn will affect the credit and there will be restrictions.
There will always be restrictions on a credit with poor credit rating. Depending on the bank’s classification, there may be a smaller amount than initially planned. It is not uncommon for the bank to only issue a small loan that will not be higher than 5,000 USD. However, it may also be the case that the bank first requires other collateral so that a loan with a poor credit rating can be granted. Known bank guarantees always include bank guarantees and life insurance. in the case of a bank guarantee, the applicant must strive to find a person who guarantees the loan.
This means that the guarantor has to pay off the monthly installments if the borrower is no longer able to do so. The alternative would be to use life insurance as security. However, the bank will only accept this if it has a surrender value equal to the loan. However, the use of life insurance should be carefully considered, because as soon as only one installment fails, the life insurance will belong to the bank. This would mean that secure protection for the future of the applicant would be lost.
Other options besides the bank
There are other options besides asking the bank for a bad credit. This possibility is in the private environment of the borrower. So it is quite possible to ask for a bad credit rating either on the Internet or in a family environment. No interest is charged on the family and a rate can also be postponed if the financial situation does not permit otherwise.
With private loans from the Internet, it must be expected that the interest rates will be very high. A credit comparison can help to find a cheap offer before a contract is signed and the applicant cannot meet the credit conditions at the end.