There is no shame in occasionally needing cash. In fact, most of us come to several points in our lives when finding money for emergency expenses or to get through a rough patch is not only a dream but a necessity. In these times, personal loans represent a really good option for getting the money you need with little hassle. However, if you have bad credit, you may worry that this option is off the table. This article will illuminate the real qualifications for personal loans and you may be surprised to find that you are no as hard off as you may think.
The Definition of Bad Credit
Many people misunderstand credit scores. Aside for leading to poor decisions, this misunderstanding can hurt you in the lending market. You need to know what “bad credit” really means before you classify yourself.
In general, those with credit scores of 680 and higher are in the best position to get a loan. Though many call any score below 680 bad, lenders routinely offer loans to those with credit in the 600s. If you rank below this level (say your score is 550 or below) you are still not completely lost, since so-called bad credit lenders are trained to work specifically with people in this position and offer them loans.
The key to finding a loan if you do fall into that low range is to know your options and to be ready to ask for the service you want. Generally, you have two choices in the lending market: secured loans or unsecured loans.
First, secured loans are the best bet for people with really low credit scores since they are backed by what we call collateral. Collateral is any real property or investment, say a house, stocks, or even a car or boat, which you pledge against the money you borrow. The lender is then given a safety net with this loan. That is, if you cannot repay your loan, the lender can seize your property. As such, your credit score may not count against you at as high a level as with unsecured personal loans.
The other option, to take an unsecured loan, is far more risky for the lender and therefore more difficult to obtain. From the borrower’s perspective, an unsecured loan is a great option however since no other assets are put as risk. It is important to note that lenders need to be ensured that you can repay the loan they extend on good faith and will therefore want you to have a higher credit score or else other terms and conditions may apply.
Finding the Right Loan for You
At this point, you need to decide your best course of action. Unsecured loans are generally available in limited amounts through private online lenders and that should be your first stop. Since you do not pledge your property, finding an unsecured loan is really the best option. If you take the time to identify three to five potential bad credit lenders who will extend unsecured loans to those with credit scores below 550, you will be in a great position.
Finding several lenders and comparing the rates and fees among them will give you the best chance at getting the money you need at a payment price you can afford each month. There is an answer to bad credit lending issues and it is the bad credit unsecured loan.