Earlier reports have it that the percentage of bad credit loans will most likely rise from 35% in 2010 to 62% by 2016. This means that in three years’ time, the industry of online bad credit loans would get so big that it will likely take over the traditional lending institutions. These numbers are not simply guessed because they are based on statistics and were carefully studied by economists.
So how prepared is the US economy to handle the growing influence of bad credit loans?
Right now, lawmakers are studying certain changes that would make bad credit loans more borrower-friendly. Last year, there was a motion to allow a central body to monitor and regulate bad credit loans. If approved, this would be a big change since the current system has it that online lenders would be governed by the immediate state in which they operate. The current system of regulation and monitoring explains why there are some states that do not allow bad credit loans.
If the history of bad credit loans will be traced, they have actually gone a long way from in terms of changes done. Online lenders are now more transparent when it comes to the total cost of their loans. There were updates in state guidelines which mandated that all online lenders should include the APRs in all their ads.
There’s just one problem: bad credit loans are only short term loans. They only last for 30 days whereas, the APRs pertain to the total annual interest. If the APRs of bad credit loans are to be calculated, the result would really be astounding; and therefore inaccurate.
Why are Bad credit loans Gaining Popularity Fast?
The main reason why bad credit loans are becoming very popular these days is that they are better-thought-of. The challenges that they faced when they were just starting out, i.e. the branding, the terms and conditions and the transparency, have been resolved.
Also, bad credit loans are positioned to be more favorable alternatives to traditional lending. They are immediate financial resolution that is accessible by everyone who is actively employed. No credit checks are needed and as long as you can prove your employment, then you may get approved.
Compared to bank loans that are for huge amounts and lock you in years of terms, bad credit loans are only for a maximum of $2500 per transaction. This makes them perfect for emergencies like dental or medical. They are also perfect for job transfers that gave you no time to prepare. And since online lenders will only allow you to borrow up to 20% of your income (including fees and interest), then that means you will have enough money to pay the bad credit loans back.
Lastly, bad credit loans provide an excellent start if you want to re-establish your credit score. That’s basically because the best lenders online are willing to you that one chance to prove that your stained financial history has long been forgotten. You are not better at handling your funds. Banks will not give you this chance; only online lenders will via the bad credit loan services that they offer.