Bad Credit Secured Loans - Are They Worth the Risk?

In this time of financial crisis and economic difficulty more and more people are struggling to keep up with their monthly obligations. As a result individuals end up falling behind on their car payments, mortgage, utilities and are forced to look for alternative lending solutions to get them through their money problems.

In this article we'll talk about the advantages and disadvantages of bad credit secured loans and whether or not they are a viable option for you.

First off it's important to understand that secured loans will require collateral on the part of the borrrower to the lender in the event that for whatever reason you are unable to pay back the amount borrowed, the lender can sell the collateral or material property to settle the debt.

While their are lenders you can apply to for these kind of loans it's important to consider whether or not the value of the purchase you are trying to make is worth the possibility of losing your collateral assets. Many people are faced with the threat of losing their home and because they are so far behind in their payments may not be able to refinance their home with a traditional loan.

As a result of the damage done to their credit, their FICO score may suffer a severe blow making it difficult to get any kind of financial help, even with a co-signer. This is where bad credit secured loans can be of benefit to the borrower IF they are sure that they can pay back the loan without losing the collateral they've pledged to obtain it.

Depending on the size of the debt, the collateral may consist of automobiles, other homes or real estate as well as business property. The obvious downside to these types of loans is that you run the risk of losing your collateral if the debt cannot be satisfies according to the terms of the agreement.

Another bit of information to consider is that depending on the amount of inquiries made on behalf of the borrower by the lender, future opportunities to obtain traditional secured loans from lending institutions will be very difficult. Traditional lenders look at the amount of times an inquiry is made for secured and unsecured loans and if you have more than three inquiries within the space of year this could severely impact your FICO score and negatively affect your credit rating.