As a person with bad credit, trying to find an unsecured loan in this tough economy likely seems impossible. Many people with bad credit have already talked to their personal banks about the possibilities of such loans only to find out that they are disqualified. In truth, unsecured loans for persons with bad credit are still available. However, they are generally not given by traditional local banks. Instead, looking at the online marketplace will provide a great alternative and many different choices.
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An Overview of Unsecured Loans
With bad credit, your choices for loans are the same as the choices for people with good credit scores. Basically, you can opt for a secured loan or an unsecured loan. Secured loans are actually easier to acquire with bad credit since they are attached to some sort of property that has value - usually a home or vehicle. With a secured loan, bad credit is less of an issue since the value of your property assures the lender that he will have something to gain if you fail in your loan's repayment.
Unsecured loans carry no such guarantee for a lender. They are called unsecured because they do not come with any sort of security or collateral for the lender. Therefore, it is only your signature that binds you to this loan. Failure to repay an unsecured loan is merely a loss to the lender, so he will be more suspicious of a person with poor credit.
Alternatives Available for Bad Credit
If you have poor credit, there are several unsecured loan options available. You need to evaluate each of these options in order to determine which is best for your financial situation and needs. However, each of these options has its downsides as well, so pay attention.
Option #1: Traditional Loans
Depending on the situation that led to your bad credit, you may still be able to qualify for a traditional unsecured loan. These loans carry long terms and higher principle amounts. However, chances are that you will need to find a cosigner for such loans. The cosigner must have the income and credit necessary to qualify for the loan and be willing to sign his or her name onto the loan and assume responsibility for it should you fail in your repayment.
Option #2: Cash Advances
Cash advance loans, which are also known as payday loans, will not require a cosigner because they also do not require a credit check. These loans are given for a short period, generally 2 weeks to a month, and only for small amounts. You can usually get anywhere from $100-$1,500 from a cash advance. You will also be charged a pretty high interest rate on these loans since their short terms preclude the accumulation of too much interest (i.e. profit for the lender).
Option #3: Unsecured Credit Card
Persons with poor credit may think that the concept of a credit card is off the table for them. However, unsecured credit cards are still issued to people who have less-than-perfect credit scores. The hitch here is that the credit line will usually be pretty low to start out ($500-$1,000). You will also generally pay top interest on any of your credit card purchases. However, if you do not need that much money and feel as though you can budget enough to repay the card within a few months, this is a very flexible option. Overtime, with responsible repayment, you can also request higher credit lines and lower interest.
Getting Money with Bad Credit
Unsecured loans are still not easy to acquire for persons with bad credit. However, they do exist in three distinct forms. Read through all of these options before deciding which is best for you and your needs.
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