Bad credit loans provide a second chance
“Bad credit loans” sounds like a misnomer. A person is granted a loan because the lender feels the borrower will pay it back in good faith. A borrower with bad credit, however, most likely does not have a good track record of repayment. Maybe consumers loans to those with a poor creditworthiness should be called “bad credit donation.” A donation is the act of giving something, usually to charity, not really expecting or hoping to get it back in return, but hoping some good will come from it.
Bad credit loans are generally attributed to the payday loan industry and the like. This industry is probably the only recourse for those consumers with low incomes or who have seen a dramatic decrease in wealth over the years. Consumers don’t especially want to be impoverished and can only really play with the cards they were dealt. The payday loan industry runs like the fancy mega banking houses in principle, but it doesn’t come with all of the red tape and bureaucracy. Unlike a loan from a major bank, which requires a credit analysis, a payday loan skips that process entirely, just looking at the person’s position in the here and now — does the consumer have a regular job, stable residence, and no prior history of payday loan defaults?
Bad credit loans give consumers a second chance. These types of loans also help consumers avoid the embarrassment of being flat broke and having no alternative sources of income. A person can feel helpless and deflated when they are turned down for a bank loan. A person can feel so trapped that they turn to the seedy underworld of loan sharks. But actually payday loans may help consumers avoid having to go to such drastic measures to get a loan from the criminal element; in turn, the overall crime rate may go down as predatory loan shark characters have no needy borrowers to prey upon.
On second thought extending loans to consumers with bad credit is in fact a sound business model and the words do fit well together. Just because “bad” is associated with the practice of “bad credit loans” does not necessarily mean it’s malevolent or negative. After all, the key to any business, whether a mega banking house or a payday loan store, is to have a demand for your products and services. Demand drives sales and revenue. In the aftermath of the Great Recession, one could argue that bad credit loans are a safer bet than most other financial transactions at the moment.
ADDITIONAL REFERENCES:
1) http://www.paydayloanadvances.co.uk/Regulatory_Bodies.asp
2) http://online.wsj.com/article/SB10001424052702304370304575151214152476000.html
