Ones’ past will always come back to haunt them, especially when applying for loans of any type. Regardless if it was a couple of late payments on a credit card, a default and subsequent renegotiation on a student loan, or a poor credit utilization ratio – your credit score can be marred with those types of errors, and can make it difficult to qualify for personal loans at a time of need. Personal loans are great tools for consumers to finance unexpected expenses like car repairs or large tax bills, but without a decent credit history, finding one may seem like a fruitless search for the Holy Grail.
This may feel so because personal loans are different from other types of loans, such as mortgages and car loans. Personal loans are riskier for the lenders as they are unsecured. Unsecured loans mean that borrowers aren’t offering up collateral to get the loan. The loans are provided by lenders on good faith, so those with a less than stellar credit history may struggle to secure one.
The process for applying for a personal loan starts with a loan application and then a loan officer reviewing your pertinent information to see if you are credit worthy. Based on the information provided, (including but not limited to full name, income, and Social Security number) a loan officer will review your information even if you have a history of bad credit.
Personal loans for bad credit are usually in smaller amounts, and may have a strict payment schedule with a higher than average interest rate. It is possible that personal loans can be obtained but it will be based on your past history. It is advised not to take any advertisements for low rate personal loans at face value, read the fine print first before signing up for one.
There are also no credit check personal loans that don’t require you to submit to a credit check as part of the approval process, but these loans carry many of the same drawbacks as other loans for bad credit.
Regardless of the type of personal loan you do end up securing, the good news is if you show that you are responsibility by paying off the loan, it can be an excellent tool to help restore your credit score. Make sure you completely understand all the terms to which you agree to and pay the bills off in a timely manner.