Bad Credit Emergency Loans
People with a bankruptcy can get bad credit emergency loans, also called hard money financing. Individuals who have had a history of foreclosures, delinquencies and default can acquire funds quickly through payday lenders or same day lending institutions. If a person has a low credit score or a questionable financial history, obtaining a traditional loan may be next to impossible. However, a medical emergency, unexpected car repair or higher than normal utility bill will not wait for the debtor to clean up their financial report. Ideally, someone who has had a bankruptcy or foreclosure would want to avoid accruing new debt until their financial blemishes have been improved. However, if acquiring a short term loan is the only way to reconcile outstanding expenses, then bad credit emergency loans can help the individual make ends meet.
Pay day lending institutions are ideal, because they require less documentation and will lend money to individuals who do not qualify for standard financing through a bank or savings and loan. All lending institutions need collateral to make lend cash or cash equivalent. Banks and automobile dealerships offer financing that collateralize a house or a car. This means that the borrower's house acts like a promise that they will pay off the loan. If the person does not pay off the loan, the bank will take the house back in foreclosure and sell it to someone else. The bank does this to get back the money they loaned in the first place. In the same way, the car dealership will repossess the borrower's car if he fails to pay the monthly finance payments. The interest they charge is a fee for loaning the money, when the buyer did not have it for the purchase. Bad credit emergency loans work somewhat differently than these conventional types of financing.
Same day lending, is obviously financing that can be processed in twenty four hours. The borrower will first fill out an application for financing. This application will not request a credit report, as most people seeking bad credit emergency loans have poor scores, so requesting them would do the same day lender no good. Proof of employment and salary, however, can give the lender a good idea of whether or not the borrower will be able to pay the monthly payments. Applications for bad credit emergency loans will also require the borrower to submit banking information, like a checking account number and the routing number of the bank. There are two reasons for this. The same day lending institution can directly deposit the needed cash into the borrower's checking account. But, the lender can also pull directly from their account, garnish wages and usurp incoming payments should the borrower become delinquent in repaying the hard money lender. The borrower has to sign a contractual agreement to this affect or the lender will simply deny his application for financing. Also, involved in the contract is the borrower's agreement to the payment schedule arranged by the lender.
Bad credit emergency loans are usually secured with the title of a car, the expectation of a paycheck or a pending income tax return. When a car title is used for security, the borrower will show proof of ownership to the lending professional. In the event that the financing should go unpaid by the borrower, the hard money lender will repossess the car, per the contract agreement signed by the borrower. The financing will not exceed a percentage of the car's market value. When the promise of a pay check is involved, the borrower will submit up to three months of pay stubs to prove the average amount of income each pay period. These types of loans are especially helpful when a car breaks down or a trip to the emergency room occurs between two pay periods. If someone only gets paid once a month, waiting twenty days to get their car from the mechanic just is not realistic. Showing pay stubs and having cash in their checking account the next day makes it possible for the borrower to go to work the next day and continue life as normal. "Blessed be the LORD, that hath given rest unto his people Israel, according to all that he promised: there hath not failed one word of all his good promise, which he promised by the hand of Moses his servant." (1 Kings 8:56)
Using a future income tax return to secure bad credit emergency loans is quite common. Should the landlord threaten eviction in January, a renter simply may not have time to wait until March for their income tax return. This is when the hard money lenders can help him out of a financial bind by loaning the money in advance of the income tax return. These loans are getting fewer, as electronically filing taxes is growing in popularity. However, it can still take up to six weeks for an electronically filed return to be deposited into a tax payer's bank account. In emergency situations, six weeks is simply too long to wait for much needed funds. In both this case and when using future pay checks as security, the bad credit emergency loan institution will gain possession of the return or pay check when it comes in.
This is financially worthwhile for the same day lender, because they typically charge more interest than conventional lenders. The frequency of loan default is much higher among bad credit emergency loans than bank financing. For this reason, the higher interest rates offset the financial losses resulting from borrower default. In addition, the borrowers with poor credit have fewer options, so cannot afford to be picky about interest rates. However, hard money lenders certainly fulfill a much needed role in helping individuals make ends meet in the case of crisis.