Unsecured personal loans are a good option to go for when you have a “situation” going on and you need some cash. You can use them to renovate your home, buy a new expensive toy or pay for that vacation to the Caribbean that you’ve been dreaming about.
Borrowing might become especially troublesome if you are doing so with bad credit – but it’s still doable. Before taking out bad credit personal loans, make sure that you understand how they work and what your alternatives are.
Understanding Unsecured Bad Credit Personal Loans
If a loan is unsecured, it means that it – obviously – has nothing to secure it (such as collateral or a property). For instance, a mortgage uses the house itself to secure the loan. If you do not make your payments on time, the lender has every right to sell the property and collect what they are owed. This “collateral” will prove to them that you are not a risk and that you want to make your payments on time – unless your purpose is to actually lose your property.
With an unsecured personal loan, you don’t make such promises. Your personal belongings will not be used as collateral, and the risk is lower than it is with a secured loan. The problem, however, is that there will still be someone exposed: the lender. If you are unable to pay, he or she will be left hanging, with no ability to recover their money. Because the lenders consider you a risk, they will often charge more in interest to somehow cut through the losses in the worst-case scenario. For unsecured bad credit personal loans, borrowing can be pretty costly – and unless you borrow from someone with adequate rates, you might end up in even worse debt than you originally were.
Generally, your credit is the one that will determine whether you get the bad credit loan that you want or not. Granted, you will get the loan no matter if you have bad credit or not; the only difference will be the state of the loan. The differences will mainly be in the amount of interest – but you may also need a co-signer to get your loan approved.
Bad Credit Loans has some very good rates that you might be interested in. If you cannot take out a loan, you might at the very least want to ask them for some advice.
Types of Unsecured Bad Credit Personal Loans
There are several types of unsecured bad credit personal loans, each of them coming with their own perks and drawbacks. Keep in mind that depending on the state of your credit, you may not be eligible for some of the options below. There’s bad credit – and then there’s very bad credit. If your credit is in a horrible state, then the creditors may see you as too much of a risk and reject your request.
- Signature Loans
A signature loan is one of the most basic kinds of unsecured bad credit loans. Basically, as the name suggests, the loan is only secured by one thing: your promise to pay. You can get these loans from banks and credit unions, and they usually amortize as time passes – so you can pay an exact amount every month until your debt is paid in full.
Keep in mind that since signature loans do not require collateral and credit checks, they will ask for a higher interest rate. To get a signature loan, simply tell your creditor that you want to take out a personal loan.
- Credit Card
A credit card is another common way to get money, even if you have bad credit. When it comes to utilising a credit card, you won’t get a lump-sum as you would in the case of a signature loan – instead, you borrow the money you need when you need it. In other words, considering that you need money at a later time, you can consider upping your credit limit. Still, this isn’t recommendable unless you can deal with the repayments.
While a credit card is available to bad credit borrowers, it is not as if lenders will discard your credit altogether – but they just don’t mind it as much. With the interest rates being as high as they are, they will see it as an attempt to build good credit.
Keep in mind that if you reach the stage of very bad credit, then you may not be accepted for these types of bad credit personal loans.
Getting your hands on bad credit personal loans is not going to be easy – but it’s still doable. All you have to do is make sure that you pick the right creditor. In this respect, you should always compare different offers before signing a deal. Granted, you may have a limited list of choices – but at this stage, you don’t really get to be picky. Essentially, you should focus on building good credit if you want to broaden your options when it comes to getting financing.