Loans for People with Bad Credit

Archive for November, 2010

To understand why banks offer unsecured loans, one must first understand what an unsecured loan is. Simply stated, an unsecured loan is a loan that does not have collateral behind it. That means that if the borrower defaults on the loan, the bank has no assets to sell, in hopes of recouping the money.

To qualify for such a loan, you must have a credit score above 620. That usually means that you have a history of paying your bills on time and aren’t seen as a bad credit risk.

But what about those of your who have bad credit? Where can you get an unsecured loan? And why would a bank or other lending institution offer you such a loan?

There are three different types of unsecured loans offered to people with bad credit: Payday Loan, Title Loans and Signature Loans.

If you find that your score is lower than you thought, a conventional loan may not be for you. Other options are: a Payday Loan, a Title Loan and a Signature Loan.

Payday Loans

You can apply and receive these short-term loans as long as you have a job (and can prove it). They are fast. And they come at a price. The interest rate can be more than 25 percent, and sometimes as high as 50 percent. Not fun when you realize that a $400 could cost you $600. But if you need it, then you need it.

Title Loans

These non credit check loans can be secured by the title of your car (assuming you own your car, free and clear). You keep the car, but the loan company keeps the title. That means that if you default on the loan, the loan company has the right to sell your car. But, you may feel that it’s worth the money and possibly losing your car. With a title loan, a borrower can receive up to 80 percent of the car’s Kelly Bluebook value. But the bad credit loan comes at a price. It, like most bad credit loans, is available only at a high interest rate.

Signature Loans

While the loaning companies do check your credit rating when you apply for these types of loans, if you haven’t damaged your credit in the last several months, it is possible to receive a signature loan. This type of loan can be secured with a simple signature. These are usually shorter loans and – depending on your income – could be more than a thousand dollars. However, the plus side of a signature loan is that the loan can actually improve your credit by giving you a positive credit score. That, alone, might be worth the high interest rate.

Why are loans offered to people with bad credit? Because the lending institution gets a great return on their investment – the institution gets between 40 and 60 percent interest. Think about it, a person with a good credit rating pays only 7 or 8 percent interest. The lending institution is making a killing, but they’re also taking a risk. There‘s no reason for you to pay the money back – except your desire to do the right thing. Just a few things to consider, when looking at unsecured loans.

No credit check personal Loans are available to everyone the law allows. The catch to finding them and is knowing where to look. We hear the advertisements on the radio and see them on the television, but we all ask ourselves, how reputable are they? Are they out there to make a quick buck or are they really there to help me?

The best way to determine if you are a candidate for a no credit check personal loan is to take a look at you credit score. If your credit score is under 600, you may be a good candidate. The suggestion is always to try for a conventional lender. If you can qualify for a conventional loan, you will get a better interest rate. But if a no credit check personal loan is the only option you have, expect to pay a higher interest rate.

One way to look at things is, even though you will pay a high interest rate, this loan can put you in the road to recovery. Every time you make a payment on time, it is a good mark on your credit score. Your credit score will slowly begin to rise and eventually you will be able to qualify for those low interest rates.

It is also a common practice for a no credit check loan to require some type of collateral. This is why it is imperative that before you accept the loan, you make sure you will be able to repay the loan. Using collateral, for the most part, gives the consumer more of an incentive to repay the loan and that is what the lender is hoping for.

Before taking the step into the world of a no credit check loan, you will want to find out if it is necessary to go this road. Get a copy of your credit report. You may be surprised at what you find. Many times there are things listed on your credit report that you are totally unaware of. If there are thing you can dispute, you can do this through each of the 3 major credit bureaus. If you are able to dispute items on your credit report, this may be an avenue for you to consider looking into a more conventional loan.

Each loan you are able to qualify for will have different terms. Some differences may be small, but sometimes what appears to be a small difference could be a deciding factor in the loan.

Before accepting any loan, make sure you have reviewed your finances. If you are unsure about how you will be able to repay that loan, you are better off to wait. Never accept money you can’t repay. This will only hurt you more and make a conventional loan down the line even harder to qualify for.

It is important to do research on the company you are applying for a loan with. Most lenders are reputable and upstanding. Before you risk your financial future, make sure you are not going with someone simply running a scam.