There has been a recent surge in many services offering quick loans for those with bad credit history. These services offer hassle-free credit to a number of people. These services are often criticised for employing predatory lending practices or charging unfairly high-interest rates. However, these quick loans with bad credit history offer a vital service which would otherwise be very hard to obtain for a lot of their customers.
The importance of credit
It is well established among economists that the prospects of a population improve as they get access to more and more financial services, also called as financial inclusion. An important service is credit and loans. This allows one to borrow money against one’s earning ability and not based on current standing assets. This access to credit and loans when needed allow an individual to take actions with a more long-term perspective. It also allows him or her to deal with an unexpected expense. For example, it allows a person to invest some money to increase earning potential. An example would be an equipment for a very small freelance practice which yet does not qualify for a business loan. It also allows one to meet unexpected expenses like a car repair bill. Being unable repair a broken down car and get it back on the road can lead a person being unable to commute to the work and put his or her job on the risk.
Inaccessibility of traditional services
Financial institutions have existed for thousands of years and loans have been a standard offering. A lot many large businesses have been built with a large support from loans. However, the access to those loans is limited to a very small number of people. Even today, getting a loan from a traditional bank is quite difficult. One of the easiest form of credit is a mortgage, which requires one to have some significant assets which can be accepted as a mortgage. With reducing home ownership rates, such a scenario is approachable by fewer and fewer people. Another requirement for getting a loan from a traditional bank is a great credit score. But one’s credit score can be ruined even buy one careless missed payment of bill or instalment towards a previous debt. Hence, a lot of people have bad credit histories. This makes traditional loans from major banks out of reach for many people, and thus they have to look towards lenders offering quick loans for those with bad credit history.
Interest rates have to match the calculated risk
The interest rates are a reflection of the risk that lender takes. This has to be adjusted with the default rates in order to be profitable. Hence, the interest rates, while sounding exorbitant especially when calculated on an annual basis, are a necessary cost of these kinds of loans.
Access to credit is quite an important aspect and cannot be taken for granted for a large section of the population with poor credit history or not much to mortgage. For many such people, quick loan with bad credit history offered by lenders such as swiftloans can be a boon.
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