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Bad Credit Personal Loans

If you have less than perfect credit, you may find it difficult to get money for the things that you need, such as buying a house or a car, or even consolidating the debt that you already have.  However, you may qualify for a bad credit personal loan that can help you get back on track.

There are two types of bad credit personal loans:  non-secured and secured.  Either type has its advantages and disadvantages to both the lender and the borrower.  Some research may be necessary to determine which is best for you.

If you take out non-secured bad credit personal loans, there is no collateral put up against the loan.  The bank or lending institution is relying on the borrower’s promise to repay the money.  The only way for the lender to get back their money should the borrower default on the loan is to go through a collection agency.  Since the risk is much greater to the lender, interest rates for the loan may be much higher than they would be for a loan for someone with good credit.

If you take out secured bad credit personal loans, something is pledged as collateral against the loan.  This is most often a house or car, though any item of high value can be used at the lender’s discretion.  Should the borrower default on the loan, the lender can then claim the collateral and sell it to pay off the outstanding balance.  Since the lender is guaranteed some form of repayment, the borrower can often get their money at a lower interest rate than with a non-secured loan.

Since borrowers can usually get the most money at the best rates with a secured bad credit personal loan, these are often the ones to look into.

The biggest issue with getting a secured bad credit loan is deciding what to put up for collateral.  If you have an automobile or piece of real estate available, these are often the best choice.  Keep in mind that the higher the value of the collateral the more money you will be able to borrow and/or the better interest rate you will receive.  In most cases, the borrower is able to keep the car or house while the loan is being repaid, but the lender will have control of the deed or title and a legal claim to the property.  There is a risk to this though.  Should you default on the loan and fail to make your payments, the lender can then repossess the collateral item to sell it to make back some or all of their money.  So use caution when you take out one of these loans in making sure that you will be able to pay in back.

Another issue of bad credit personal loans is knowing where to look for them.  Not all lending institutions are willing to take the risk of working with borrowers with bad credit.  However, a great deal of them will, so you will want to take some time shopping around before you sign an agreement.  Compare the amount of money that you will be able to borrow, the interest rate, and the loan repayment terms to make the determination of which loan is best for you.


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