What Questions Should I Ask a High Risk Personal Loan Lender

A high risk personal loan lender takes a significant risk by extending credit to those with poor credit histories. While there is much to gain on both sides of the coin as lenders can make substantial profits and borrowers can get themselves out of debt or receive emergency cash flow, high risk personal loans are high risk for both parties. Lenders will see a high percentage of defaults. Those who receive the loans face high fees and penalties. You can put yourself in a vulnerable position by seeking a high risk personal loan. To protect yourself, know what questions to ask.

Are my interest rates subject to change?

You will be quoted high interest rates on high risk personal loans. This part is expected. An unexpected rate increase in the future can mean you will have difficulty simply paying the interest on your loan, let alone the principal. Lately, lenders have used low teaser rates to lure potential customers. Know what the rates are, get an assurance that they will not increase, and get this assurance in writing.

Do I need to post collateral?

Most high risk personal loans do not require collateral. Be wary of posting an asset such as your home or car as collateral for any loan. If you must post collateral, understand the terms detailing when that collateral can be seized. For example, can the collateral only be seized in case of bankruptcy? Or, is it seized and held when you are late on a payment? Do not make unreasonable promises just because you are in need of money.

What are the fees for paying off the debt early?

Many people who seek high risk loans are in a bad financial position because of one bad financial decision. It is likely that they can rebuild their credit prior to paying off the loan. If so, they may be eligible to pay the loan off early through refinancing with a lower-risk loan. There will always be penalties to paying of a loan early as you are taking back a part of the lender’s potential profits. Make sure the terms are within reason.

What are the fees for late payments?

If you have bad credit, you may have problems making monthly payments on time. While you should fix this problem immediately, it is likely you will occasionally be late on a payment. There will be fees. Make sure you understand exactly what occurs in this case. When does a past-due bill go to collections? What is the fee? Is there interest on the fee?

What is the penalty for defaulting on the loan?

Your credit is already hurting. You have few assets to post as collateral. What happens if you default? You may face detrimental financial consequences such as bankruptcy or foreclosure. Furthermore, some lenders can become aggressive when seeking repayment. It is not uncommon for loan shark-like tactics to be applied. Ensure there is a legal process in place for handling the default.

 

 


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