Drawbacks Of Secured Loans
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When anyone applies for any kind of credit or personal loan, it's not simply a question of the loan company approving or declining you arbitrarily - it is all a matter of your credit rating.
Your score is a financial indicator of the risk you pose - that is to say, whether a lender should give you a personal loan or should not, completely decided by whether you are seen as a reasonable or unreasonable risk. Your credit report - which is kept by all the main credit record agencies, such as Experian and Equifax - discloses the credit you have had in the past (as far back as six years), in addition to ongoing debts.
When you make a request for any kind of credit, the lender will perform a credit search - and will assign you a credit rating based on the facts in your credit record. Should you have a large number of debts - and in particular if you have lapsed on payments or have been late with them - you will have an adverse credit score.
The smaller your credit score, the more difficulty you will have obtaining credit since a low rating equals there being a high risk of you failing to pay back on time.
It also confirms whether you are on the electoral roll and any financial associations. If you are not on the electoral roll, it might affect your potential for being accepted for credit, since your home address is not 'proved'. A financial association is someone with whom you have been financially linked, currently or at some other time. It could be a past partner, your mum or dad, or maybe even anyone who lived at your address before you and who has not been eliminated from your credit file.
In the event the individual or people who are considered a financial association are not in any way associated with you - i.e. you have no ongoing connected financial commitments and they are no longer living with you - then you can ask that the credit record agency erase the incorrect details.
Continuing to have them on your credit file - in particular if they have a record of financial trouble in their history - can have a harmful affect on you receiving any credit.
When deciding on whether to approve a personal loan, loan companies will also look to see what else you are paying on other existing debts - if you have lots, they could reject your request for a personal loan, even when your score is sufficient. This is because they may deem you to be exceeding your financial limits with yet another debt to meet.
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