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What Is a High-Risk Loan?
A high-risk loan is a financing or credit product that is considered more likely to default, compared to other, more conventional loans. The higher risk of default can be attributed to one or more factors when evaluating a loan request.
Perhaps the most common examples of high-risk loans are those issued to individuals without a strong credit rating. High-risk lenders may consider a variety of factors in making such a loan and setting the terms:
Income and ability to pay: Lenders compare a borrower’s annual income to the amount of money desired. Income verification may include tax returns and current paycheck stubs.
Past history of repayment: The borrower’s credit history indicates whether they pay their debts on time. Those with strong credit ratings are considered less risky than those who do not have a good credit score.
Security: Any tangible assets the borrower can put up as collateral can help their application. For example: If a car is used as collateral, and the borrower fails to pay back the loan, the lender can repossess the car.
Co-signer: A co-signer with a better credit rating can help reduce the risk to the lender by agreeing to pay back the loan if the borrower fails to do so.
No Income Verification Loans
High-risk loans made without reviewing the income of the applicant are known as No Income Verification (NIV) or No Documentation loans. These higher risk loans can also take the form of unsecured loans (made without collateral from the borrower) or secured loans issued with no money down from the borrower.
Lenders specializing in such high-risk loans may charge higher fees and interest rates to offset any potential losses.
Get a NetCredit Personal Loan or Line of Credit
Although NetCredit does not specifically arrange “high-risk loans,” we understand that customers are more than just credit scores. When you apply for a NetCredit personal loan or line of credit, your broader financial picture will be considered to create an offer just for you. Plus, an online application makes it quick and easy to check your eligibility.
Someone recently out of college, for example, might not have the work or credit history needed to establish much of a credit score. A couple recovering from a financial setback might have a history of fiscal responsibility, but need help in dealing with unexpected bills. In cases like these a NetCredit online loan or line of credit could help bridge the gap to financial security.
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