Lenders Return to Making Loans for Borrowers with Bad Credit

After the depressing recession in the recent years, from 2008 to 2010, together with the additional trend of foreclosures, repossessions, defaults and personal bankruptcies, many would believe that the country and its lending industry would realize a valuable lesson in terms of poor credit.

However, that is not exactly what is happening as of the moment.

Some of the major lenders are starting to engage again in the business of giving loans to borrowers with poor credit. These are not the same with the go-go years heading into the collapse of 2008, when lenders would give loans to borrowers with poor credit, or for liar loans, zero credit at all.

Considering all that took place in the past, one doesn’t have to be too fearful to be anxious that this trend will speed up.

A survey concerning the lending industry was conducted by The New York Times and they discovered that Capital One and GM Financial are once again giving loans to borrowers with less-than-perfect credit. Moreover, HSBC and JP Morgan Chase are taking risks in subprime lending once more.

According to reports from Equifax, lenders gave out 1.1 million new credit cards last December 2011 to borrowers with bad credit. This increased by 12% from December 2010.

Furthermore, borrowers with bad credit made up 23% of new car loans in quarter four of last year. This is an increase of 17% from quarter four of 2009.

Lenders are looking for risky borrowers because there are many of them. Although they have a tendency to be desperate and innocent, lenders earn a lot from them because they can be charged very high interest rates and accumulate late fees and penalties.

Reporters for Times met Annette Alejandro, who lives in Brooklyn and is currently without a job. Her car was repossessed and she had just been out of bankruptcy. After searching for jobs unsuccessfully, she comes back to her apartment and finds lots of credit card and loan offers.

Perhaps, this is sort of a warning for another credit meltdown.

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Filed under: bad credit • Credit • Credit Score • Loans

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