Demand Loan: Qualifying with Bad Credit

A demand loan is a financial arrangement that will take some time for the consumer to become fully comfortable with because, put bluntly, it is such an alien concept! Most of us are used to the traditional forms of loans whereby in exchange for a fixed sum of money which is lent to the borrower, the borrower is required to pay back that money in an equally fixed schedule.

Repayment

Repayments must be made in the precise manner and order in which they have been determined; otherwise the borrower will incur penalties. If the borrower defaults on the repayment of interest, then they will incur financial penalties and in more severe cases, even face the possibility of their assets being sold to satisfy the debt.

You may have read that sentence and thought "well, at least it is irresponsible borrowers who are being penalized". Sadly, even responsible borrowers are unduly penalized in that if they repay the loan before the actual date specified in the terms of the loan, then they face a penalty for that early repayment.  

Flexible Terms

A demand loan is a far more flexible arrangement in that there is neither a clearly specified repayment date nor fixed schedule for interest payments meaning that the borrower can pay as little or as much as they want. There are no penalties for early payoff of the principal, meaning that the borrower is well within their rights to pay off the loan sooner rather than later and it is often used within a business context, in order to better enable young companies to grow and develop a market presence.

Built in Benefits

These types of loans carry with them a remarkable list of benefits and advantages are extremely sought after by borrowers for these reasons. That said, it is important to appreciate that at the end of the day, these loans, as unconventional and flexible as they maybe are still loans and so there are factors which have to be considered and satisfied in order for the user to be eligible for one.

As previously touched upon earlier within the article, demand loans are most commonly encountered in a commercial environment specifically to assist young companies but this does not mean by any stretch of the imagination that they are completely exclusive to the commercial sector and a demand loan can be ideal for a young couple trying to purchase property.

Co-signer

One of the easiest ways to gain access to one of these loans even if you suffer from a poor credit rating is to have a co-signer for the loan. This means that you can rely upon their superior credit rating and thus significantly improve your chances of gaining access to one of these lucrative loans. Just be cautious if you are acting as a co-signer because it is a significant burden and one that is fraught with risk: for example, the lender may demand that you pay outstanding balances in lieu of the borrower even if the debtor is not in default.