Types of Personal Loans Available If Your Credit is Bad
Even if you struggle with poor credit, there are still a variety of personal loan options available, though you are going to pay more interest (if someone tells you this is not the case, they are lying!).
Two examples of these are known as payday loans and signature loans.
Signature Loans: Obtaining a signature loan may prove to be difficult if your credit is quite poor or only fair. Banks do not require collateral to approve a signature loans, which put them at a higher risk.
Payday Loans: If you only need a limited amount of money for a more immediate purpose, a payday loan may be a more suitable option. Most payday loans will not be subject to a credit check. Rather, the lender will only need to verify that you have a steady job and possess a checking account.
Can You get a Personal Loans with a Poor Credit Score?
There’s a couple types of personal loans: unsecured and secured. The secured require collateral to back the loan while unsecured does not. As such, unsecured loans will require good credit history AND proof of stable income.
Unlike loans given to those demonstrating a good credit history, those given to applicants with poor credit carry far higher interest rates. For some people, getting a loan of this sort can be a challenge. If a bank feels that someone is a potential risk, they are not likely to approve them for a personal loan Although personal loans provide the banks with a reliable stream of revenue, they still limit the amounts they are willing to loan out in order to cover and minimize their risk. So the answer here is that it’s unlikely you are going to qualify for an UNSECURED personal loan from a bank.
High Risk Personal Loans
High risk personal loans are more commonly referred to as payday loans. Lenders of these loans put themselves at a high risk since the borrower’s credit history is not checked. By the same token, it is the ease of obtaining these loans that has made them so popular with those having poor credit. In an effort to protect themselves, the lenders granting payday loans will often charge an unreasonable amount of interest. By doing so they make a large amount of profit from the loans they approve, some of which is then used to cover the loans that default.
Unfortunately, if your credit is poor but you still require a personal loan, payday loans may indeed be the only option you have.
Secured Personal Loans
If you are in possession of assets which qualify for collateral use, a secured personal loans may be a good option. Valuable assets which are commonly used for collateral purposes include houses, real estate, stocks and bonds, and good insurance policies.
Since secured personal loans carry a lower threshold of risk for the bank, you can often receive the money you need at a lower interest rate. If you are careful and fortunate enough to have maintained an impeccable credit rating, this type of loan can usually give you the best interest rates available.
Guaranteed Personal Loans
Guaranteed personal loans are another term often used to describe payday-type loans A guaranteed personal loans is an option for everyone, regardless of their credit history. Approval for a payday loan rarely entails more than a verification of your checking account and employment status. The common procedure is to place the funds in the borrower’s checking account via direct deposit. The borrower can then withdraw the funds as they normally would their paycheck funds. The drawback to these loans are their extremely high interest rates.
It can be a daunting challenge to find a personal loan if your credit history is poor. If you have credit issues, payday loans or secured loans based on collateral may be the only options you have to utilize. Be prepared to pay a substantially higher interest rate than you ordinarily would if your credit was in good standing. The best way to getting a better interest rate is to concentrate on improving your credit situation.
Sometimes A Loan May Just Not Be A Possibility.
I often field questions from consumers regarding the large loans they wish to take out. Many people with less than stellar credit have no desire to pay the higher interest rates they are quoted.
Therefore, I would like to present a suggestion. How about we give personal loans to everyone with bad credit–free of charge! Anyone with a poor credit score who walks through the door will be automatically approved for no interest loans! If everyone qualified for a low interest loan, the banking system would collapse.
What I’m saying is that sometimes if you don’t quality, you just don’t qualify. If that’s the case, then you need to either pay the higher interest rates (if you still qualify) or…fix your credit history first.