In order to get a personal loan with bad credit, it’s essential that you understand what a personal loan is, what a personal loan is used for and who can get a personal loan. Personal loans are a type of installment loan in which money is borrowed from a lender, bank, or credit union. These loans are paid by with interest by way of fixed monthly installments for the life of the loan which generally ranges from 1-5 years, depending on the amount of money you have borrowed. Personal loans are available as a secured loan or an unsecured loan. Secured loans are backed with a form of collateral, such as your car or your home, whereas an unsecured loan doesn’t require collateral. If you need a personal loan and have bad credit, it can be difficult to get either a secured or unsecured loan; however, by doing your homework, you may qualify for a personal loan with bad credit.
What are Personal Loans Used For?
If you get a personal loan, the money can be used as you see fit. For instance, personal loans can be used for things such as a wedding, a vehicle, your education, or home improvement. You can use the money wherever you choose. Many people get a personal loan to use for paying off several small debts, which will allow them to reduce their payments to one or two each month.
Who Can Get a Personal Loan with Bad Credit?
If you have bad credit, that means you have a relatively low credit score. If you own property or a home, there is a high chance you may get a personal loan for an amount that is for or slightly higher than the value of your property. If you don’t own any property and have bad credit, you may still be a candidate for an unsecured loan, which typically has higher financing costs and higher interest rates.
Tips to Get a Personal Loan With Bad Credit
The first step to get a personal loan when you have bad credit is deciding whether you need an unsecured or a secured loan. Keep in mind that a secured loan means that even though you have bad credit, you still have some type of collateral that can be used to secure the loan. This means that if you apply for a secure loan and do pay the full amount due back to the lender, they will take the item you used as collateral. Other tips to help you prepare for getting a personal loan with bad credit include:
- Get appraisals for the item being used for collateral, before contacting a lender
- Gather personal information. Before going to see a lender, make sure you have all of your personal information ready and up-to-date, including bank statements, identification, and payroll statements.
- Research lenders that offer personal loans for those with bad credit and visit those that offer the lowest interest rates first
- Review your credit report. It is important to review your credit report from all 3 credit bureaus. Look for things that may be wrong, such as bills that have been paid off, but still appear on the report, and reports that do not belong to you. Keep in mind that the higher your credit score is, the better the chances are of getting a loan with lower interest rates.
Personal loans are available to help with unexpected financial problems, but they cannot control or correct all of your financial problems. When it comes to being financially responsible, the most important thing you can do is to improve your credit rating, not use credit cards on items that aren’t a necessity and be sure to pay off all outstanding debts. If you do get a personal loan with bad credit, it is imperative that you make sure to never miss an installment payment and to use the funds wisely.