Your credit rating plays a important role when trying to obtain a unsecured personal loan. Credit scores range from the lowest at 300 to the best of 850. Having a
credit score over 700 will most likely approve you for the best personal loan rates available. If your credit score is under 700 don't panic. Most banks only require a credit score of 620 to be
approved for a prime mortgage rate. On the other hand, unsecured personal loans are the most difficult to obtain than mortgages and credit cards. If your credit score (FICO) is under 680 your
chances of getting a personal loan unsecured is greatly reduced, and almost impossible with a credit score under 620. The lower your score the higher your interest rate will
Most lenders that loan to applicants with bad credit are payday loan companies. Beware that payday loans are illegal in some states and recent changes in the law for payday lenders have also made payday loans illegal for members of the military. With a typical payday loan, you might write a personal check for $115 to borrow $100 for two weeks, until payday. The annual percentage rate (APR) in this example is 390 percent! If you can repay the loan quickly, it may not appear such a bad deal. But if you can't pay off the loan quickly, that relatively small loan can grow into a large amount of debt. At 390 percent, a $100 loan will become $490 in a year and $2,401 in two years.
Another high cost way to borrow money is a tax refund loan. This type of credit lets you get an advance on a tax refund for a fee. APRs as high as 774% have been reported. If you are short of cash, avoid both of these loans by asking for more time to pay a bill or seeking a traditional loan. Even a cash advance on your credit card may cost less.
Other alternatives for obtaining personal loans for people with bad credit are title loans. This loan is secured by a clear vehicle title. Another source is securing the loan with items in your home. These lenders will secure the loan using serial numbers on common household items, like televisions, radios and dvd players. Lastly, if you own a home, you can obtain a loan on the equity available.
To improve your credit score to help you secure low cost loans in the future you should pay your bills on time. Delinquent payments and collections negatively impact your score. Keep balances low on credit cards and other revolving credit because high outstanding debt lowers your credit score. Apply for and open new credit accounts only as needed. and don't open an account just to have a better credit mix because it probably won't raise your score. Pay off debt instead of moving it around because owing the same amount, but having fewer open accounts may lower your score. Just remember that you don't rebuild your credit score, you rebuild your credit history. Time is your ally in improving credit and there is no quick fix for a bad credit score, so be suspicious of any deals that offer you a fast, easy solution.
In conclusion, obtaining personal loans for people with bad credit will come with a high interest rate and may have to be secured. Your best option is to hold out until your credit improves or to find someone with good credit that will co sign.
Did You Know? Scam lenders may say you have been approved for a loan, then call or email demanding a fee before you can get the money. Any up-front fee that the lender wants to collect before granting the loan is a cue to walk away, especially if you are told it is for insurance, processing, or just paperwork. Legitimate lenders often charge application, appraisal, or credit report fees. The differences? They disclose their fees clearly and prominently; they take their fees from the amount you borrow; and the fees usually are paid to the lender or broker after the loan is approved. It is also a warning sign if a lender says they will not check your credit history, yet asks for your personal information, such as your Social Security number or bank account number. They may use your information to debit your bank account to pay a fee they are hiding.
Even though your credit may be bad, there is one website we found and maybe the only source to get a unsecured personal loan with a credit score as low as 520. A credit
community website called prosper.com, which is a marketplace for credit that enables people to lend money to other people in a safe, efficient manner.
Prosper's founding principle is that people from close communities act more responsibly towards each other. Prosper leverages this powerful concept of group responsibility and applies it to person-to-person lending—resulting in better interest rates for people that borrow and lend. Prosper enables people to create groups, which borrowers can join and request 3-year, fully amortized loans from $1000 to $25,000. Borrowers can also indicate the maximum interest rate they are willing to pay, plus repay the full amount of the loan at any time and there are no early payment penalties. Lenders search for and select these listings based on the borrower's credit, debt profile, and group affiliation. Lenders bid on listings by indicating a minimum rate they are willing to accept. When a loan is matched between borrower and lender, Prosper handles all of the tasks needed for payment and collection of the loan. Borrowers typically receive their loan within 2 to 7 business days of the end of a successful listing. A personal checking account and a verifiable source of income is required, there is also no cosigners allowed.
Learn how to apply for a unsecured personal or business loan at prosper.com today!
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