Friday, December 27, 2013

Personal Loans for Those With Bad Credit

It has happened to all of us, both good and bad credit holders. We have an unexpected expense. The car throws a rod, the refrigerator is turning into a mold factory, an expensive new prescription is needed to treat an unforeseen medical problem. Maybe a bill you have set aside has suddenly come due - in full! These unfortunate demands and other situations rise up in lives daily and sometimes the only way to get rid of them is to throw money at them. You could find that cash by drawing a personal loan for those with bad credit.

Credit Histories and Income Are Scrutinized

You need to pull your credit reports. You need to examine each thoroughly. Typically there are errors. You should get those taken off your reports, but remember this can take 1-3 months. So prepare before you go shopping for your personal loan for those with bad credit. However, understand that your scores will not be the deciding factor all the time. More important to these lenders is your debt to income ratio. Lenders will want to know about your current obligations and your income. They want to be sure that you have enough money left over to meet another debt.

Two Types of Personal Loans for Those With Bad Credit

When you apply for your personal loan for those with bad credit, you will see that most lenders offer two options - secured and unsecured. Secured loans are those wherein the borrower offers collateral, or valuable property, to secure the loan. If you default on the loan, the lender can seize the property and use the proceeds to cover the cost of the loan. Because of this security, interest rates are often much lower.

For secured personal loans, the collateral can be a house or other real estate, stocks and bonds, or even a late model car. Ask the prospective lenders which type of property they will accept. Unsecured loans have nothing to back them except your spoken promise and your signature on the dotted line. To compensate for the increased risk, the lender is obliged to ask for higher interest rates for your personal loan for those with bad credit.

Predatory Lenders

Never take the first offer. One good offer means there are probably two more out there even better. Personal loans from traditional lenders (for those who can get them there) as well as from private lenders carry the legally highest interest rates than for any other type of loan, whether the borrower has good or bad credit. Of course, the better your credit scores, the lower your interest rates. Do not fall victim to predatory lenders.

If someone says they are doing you favor because of your credit scores, walk away immediately, they are out to get you with high interest rates and exorbitant fees. Once you have selected four or five lenders whose terms and conditions you like, research each company thoroughly. Try the Better Business Bureau online listings. Always read all the fine print. No question is a silly question. Understand the terms and conditions of your personal loan for those with bad credit thoroughly.

Credit Repair Possibilities

Another good thing about personal loans for those with bad credit is that they offer an opportunity to put some shine on your credit history. You should make sure you make every payment on time and in the amount prescribed in your contract. If you keep doing this, even with small loans, your credit ratings will increase immediately and even dramatically.

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