Personal Loans With Bad Credit

There was a time when advisers would warn people that should their credit scores fall too low, that the path to a personal loan would be effectively bricked up for good. This is not actually the case. The economic realities of recent years dictates that even those with low scores are entitled to a loan, though the personal loans with bad credit on offer do come on less favorable terms. That fact is somewhat understandable, of course, given that the lenders offering personal loans for those with bad credit are clearly taking a larger risk than if the applicants had a perfect credit history.

Nevertheless, the availability of loans for personal use, not for a clearly defined purpose, is something of a relief to those concerned. With that in mind, most are quite happy to accept the opportunity and to use it wisely to get back on financial track.

This is something lenders take into account. After all, most people have found themselves in difficult circumstances through no fault of their own, with the market the culprit, and lenders recognize this fact.

To say that personal loans with bad credit have no set purpose is not completely accurate. These loans are generally used to consolidate existing debts.

In that sense, marketing personal loans for those with bad credit is a strategic move by lenders to recover their own share of a faltering economy. And while they may be loans for personal use, the reasons for an application are generally clearly understood. Basically, they can alleviate the overall debt.

Credit Card Debt

A personal loan with bad credit is especially useful when trying to clear a relatively large debt in one go. A perfect example of this is credit card debt, with one credit card alone perhaps running up to $10,000 in debt. As we all know, the problem with credit cards is that the interest rate can worsen the situation, mounting up pressure very quickly.

A loan large enough to clear the credit card debt in one swoop is preferable, and personal loans for those with bad credit are the only option. Banks may be happy to provide loans for personal use, if the personal use is to clear a credit card debt. However, online lenders do tend to offer the best deals.

Overdue Bills

The pressures of keeping up to date on household bills, like electricity bills for example, can become too much. A personal loan with bad credit could be what is needed to get on top of things again. These tend to be much less than the kind of debts that build with credit cards, with perhaps $5,000 or $6,000 enough to clear the combined costs of electricity, phone and those general extras that come with running a home.

This is where loans for personal use are most apt, as it can cover practically anything. With that in mind, personal loans for those with bad credit are clearly the ideal answer to the problem.

Other Loans

Finally, any loans that may have been taken out before the crisis hit, still need to be repaid. This can mean a very large personal loan with bad credit is needed.

Perhaps, between a home improvement loan, an auto loan and an outstanding personal loan, as much as $100,000 is owed. The repayments for all three can be $2,500 or more per month. If a loan can be secured to clear that debt, and have repayments of less than $2,500, then progress can be made.

While the large sum may provide some concern from lenders, the point of offering a personal loan for those with bad credit is to provide the chance to regain financial control. Therefore, large loans for personal use can be secured and be used to clear debts and reduce the financial pressure.

$15,000 Unsecured Loans

Extra cash can be much more than just a welcome arrival – it can be a lifesaver. Thankfully, the chances of getting unsecured loans for bad credit management purposes are much better that many think. We all love to get cash injections, even at the best of times. But when our debts are mounting, and we’re struggling to meet them, the welcome injection can actually be a necessary aid to keeping ourselves afloat. But in these circumstances, it can be difficult to get unsecured loans, for bad credit borrowers especially.

The trouble is in convincing lenders that granting even a modest-sized loan, even $15,000, is not as major a risk as the credit scores seem to suggest. And the good news is that applicants seeking loan approval without collateral do have viable options.

However, there are criteria to meet and compromises to accept before any deal on an unsecured loan can be signed. And having the loan application in good order is essential.

Is A Loan Worthwhile?

It might seem impractical to get a loan when already under financial pressure, but it can be a worthwhile investment. By using the funds from an unsecured loan for bad credit purposes, some of the debt can be cleared.

More importantly, as long as the terms of the new loan are good, with the monthly repayments lower that the repayments of the debts cleared, the financial pressure is actually alleviated. The result is that even getting loan approval without collateral translates to an improved financial situation.

With extra cash freed up, it provides an opportunity to gradually clear the remaining debt completely. And in the long run, this means a higher credit score, lower interest rates on future unsecured loans, and a vastly improved debt-to-income ratio.

The Trouble With Unsecured Loans

The key issue that comes with applying for unsecured loans for bad credit purposes is that the terms can be quite poor. Secured loans offer lenders a source of compensation should the borrower default on the repayments, but no security leaves the lender carrying all of the risk.

As a consequence, the interest rates charged are higher than normal, while the loan limits are usually low. This is why a $15,000 loan can be hard to secure, but be aware that securing loan approval without collateral is never impossible.

This is because loans – especially unsecured loans - are approved on the basis of affordability. So, the employment and income situation takes precedence over any credit score, and the amount of excess income available to make repayments dictate whether approval is forthcoming.

Tricks to Help Get Approval

So, how can approval be secured? Well, there are a few ways to do this, not least telling the lender that the application is for a unsecured loan for bad credit management purposes – basically to pay off debts. Lenders like to know the applicant is being constructive with their money.

Improving your credit score in advance of an application is another worthwhile move. Take out a small payday loan, and use it to catch up on arrears. When the application is submitted, the credit score is slightly higher and signs of genuine improvement are evident.

Lenders do not like to grant loan approval without collateral, but adding a cosigner to the application is one way around the problem. They are effectively guarantors for the loan, promising to make any repayments the borrower is unable to make. And with repayments guaranteedFind Article, the interest rate is lowered and the unsecured loan becomes more affordable.