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How to Find a Personal Loan for Poor Credit

Nearly everyone reaches a point in life at some time or another where he or she is in need of a personal loan. Emergencies happen, whether they are due to medical problems, job loss, or other problems such as divorce or car trouble. For people with very good credit, these situations do not present much of a problem, as it is easy for them to secure a quick loan, either from their bank or their credit card company. Fast cash is readily at hand for those who have the means to pay it off, because there is a lot of money to be made from this section of society.

People with bad credit; however, are not so lucky. It can be very difficult to find a company willing to loan money to someone with poor credit, and this usually just makes the emergency that much worse. Fortunately, there are companies that cater to this segment of the population, providing personal loans for poor credit applicants.

More often than not, this type of personal loan is known as an unsecured loan. What this means is that the borrower has not put up any collateral to secure the loan, or give the bank or credit union an asset they can lay claim to in the event the borrower fails to pay back the loan. Because of this lack of security, the lender is taking a risk in loaning money to a person with bad credit, because statistically these loans are more likely to fall into default. So to make up for this as a whole, personal loans for poor credit come with interest rates that are higher than loans made to people with good credit, or secured loans such as home equity loans.

One way to get around this is to offer up some sort of collateral and make the loan a secured loan instead. These loans are typically a lot simpler to arrange, and will have much lower interest rates than unsecured personal loans. If the borrower has any equity in his/her house, or title to another type of personal property such as land or a stake in a business, these assets can be used as collateral for the loan. One thing to keep in mind is that the asset must have an appraised value that is greater than the amount being borrowed for it to qualify as collateral.

The downside to applying for loans of this type is that they usually have closing costs associated with them. In most cases, the property that is put up as collateral must be officially appraised by a professional before it can be used, and the borrower is usually responsible for this cost, which can run into the hundreds of dollars. In addition, other fees are often charged such as document preparation fees, so borrowers should be prepared to have to spend money in order to borrow money.

In short, personal loans for bad credit individuals are available, even if they are more difficult to arrange and have less generous terms. But by applying for a secured loan rather than an unsecured loan, the borrower can mitigate the effects of his/her bad credit and give the lender more security in the loan, which will in turn translate into much better payback terms.


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