Bad Credit Loan Options

The are quite a few individuals in this troubled economy that are certainly struggling to make their maxed-out budgets go a little further, and keep their repayment obligations as current and up to date as much as possible. Unfortunately there are those who have reached the end of their viable options, and consequently have fallen into the tarnished or bad credit score category. There are, however, certain options available today through which these consumers can indeed acquire loans, even with bad credit histories appearing on their credit reports.

If a consumer has a bad credit history, it goes without saying that when the time comes to try and get the funds that they need, there are far fewer options available. But, once the loan is secured, and the borrower is prepared to pay higher interest rates than normal, there is always the great benefit of raising their current credit rating if the repayment schedules are strictly adhered to – on time, and for the entire duration of the loan commitment.

The different types of loans for bad credit available to this type of borrower are generally offered as either secured loans, or unsecured loans. Secured loans are defined as the type that are ‘secured’ with some form of collateral as protection for the lender should the borrower default on the obligation. The unsecured loan usually involves a detailed credit history examination by the lender, is not ‘secured’ with any form of collateral, and invariably has a very high interest rate associated with it. In addition, these loan classifications can be viewed as personal loans, and most often are in the neighborhood of a few thousand dollars with a term of one or possibly two years.

The following is a brief outline of the types of personal loans available for anyone with a bad credit rating.

  • Secured personal loan – This type of loan is an good option if the borrower has a major asset or personal property such as an automobile or a home that can be offered or pledged as security to the lender, and is usually offered with an acceptable rate of interest as a result.
  • Unsecured personal loan with a co-signer – This type of loan is also a very good option because the borrower can request a family member or close personal acquaintance with great credit scores and a long credit history showing stable financial behavior to act as the co-signee for the loan. This is turn could also result in the borrower getting much better interest rates, along with more flexible repayment terms.
  • Unsecured personal loan – If the borrower has a bad credit rating, and has no personal property or assets available to offer as collateral to the lender to absorb the risk involved with the loan, the result will generally be much higher interest rates applied to the loan.
  • Payday loans – This option is generally viewed as the option bearing the highest cost to the borrower, and is usually limited to a much smaller amount of funds, such as $1,500.00. The procedure also usually requires the borrower to post-date a personal check to cover the funds to be borrowed from the lender, as well a substantial fee for the service which can run as high as 15% or more of the funds being borrowed. New fees are applied every time the loan is extended beyond the repayment date, which, as the name suggests, is the next ‘payday’.

It is good for the borrower to remember to research wisely and diligently for the best offers available, and only with reputable lenders in good standing. Only plan to borrow exactly what is needed, and an amount that is applicable for maintaining the best budget strategy for repayment. Once the loan is finalized with the best possible rates and terms, the process of getting those bad credit scores to a more acceptable level begins, which is exactly what makes borrowing money in the future a much easier task.