Unsecured Personal Loans For People With Bad Credit

by Angie Rees Finance

An adverse credit history doesn’t mean you cannot get a loan. Some lenders do reject loan applications from people with a poor credit record; however, some others still offer unsecured personal loans for such applicants, without discriminating with them on the basis of their credit history. While some financial companies offer secured bad credit personal loans, a number of others offer unsecured loans.

Unsecured Personal Loans for Bad Credit

An unsecured loan is a type of loan offered without the borrower having to offer any security or collateral. When the loan is given in good faith, without any collateral, this is a form of unsecured loan. On the other hand, a secured loan is offered against a collateral or asset. However, for those with bad credit getting a secured loan option may seem impossible due to the fear of losing their asset in the event of failure to repay the loan.

•    As a result, bad credit personal loans offer a viable alternative if you don’t have any property that you can use as collateral. Since these aren’t backed by or tied to collateral, unsecured personal loans are offered at high interest rates and longer repayment period. As lenders face a higher risk of payment default, they charge higher interest to make up for the risks.

•    The higher the interest rates, the costlier the total cost of loan. While interest rates for bad credit personal loans online are higher than secured loans, they are still better than most credit card rates, which are often variable and rates often change.

•    You might want to choose unsecured personal loans available at a fixed interest rate, depending on loan terms. In this case, these loans are given at a fixed amount of money and require you to make scheduled payments so that you make the loan repayment by the end of the term. You might choose this option if you feel you cannot repay debt without a structured plan.

Moreover, interest rates remain the same during the entire life of the fixed-term loan, which means there is no risk of increase in the loan amount, making it easier for you to plan for monthly repayments.

Take your time to weigh all the pros and cons of the loan terms before deciding whether you want bad credit personal loans to meet your present financial needs. It will help to look for reputable lenders offering bad credit personal loans online at cheaper rates than others.