When money is tight and you need some extra cash on hand, sometimes taking out a personal loan is the very-best option you have to get the cash you need. After all, borrowing money from friends and family can often end badly. And, taking out money against your credit card will mean you end up paying sky-high interest rates on your loan but with no final payoff date in site.
With a personal loan, you can keep the interest rate you pay to a minimum if you are willing to take out a secured loan. With secured loans, you must put something of value up as collateral to the lender. Essentially, you are signing this item of value over to the lender for the duration of the loan. As long as you pay it back on time and in full, the collateral item will be returned (or signed back over) to you.
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Of course, qualifying for the lowest-possible interest rate should be your number one goal. That is because every additional point of interest you pay can greatly increase the total cost of the loan.
If you are looking for bad credit secured personal loan resources, here are 5 tips that can help:
1. Decide on what you will use as a collateral item:
Start by thinking about all of the possessions of mid-range value or high value that you own. Which ones are you potentially willing to put up as collateral? One of the most common types of personal loans is an auto title loan, which involves your signing your car's title over to the lender during the period of the loan. However, you can also put up a piece of jewelry, a musical instrument, a piece of art, or other collector's items. Even a future paycheck will serve in some cases (note: this is called a payday loan).
2. Get your collateral item appraised in advance of contacting lenders:
For any non-cash or non-cash-equivalent item that you wish to put up as collateral, get its value appraised before approaching a lender for a loan. It is always a good idea to get third-party verification of the value of your item so that there is no misunderstanding between you and the lender. Doing so will also help you figure out how much you can borrow.
3. Review your credit report from the perspective of a lender:
Even if you have a bad credit score, it is likely that your lender is going to review your credit report before making you a loan. Even after you have found the right type of lender that specializes in working with bad credit individuals (see #4 below), they are still going to want to review your credit history as they determine whether you are creditworthy. So, review your own report in advance and be ready to answer any questions that may come up.
4. Put on your researcher's cap and find a list of qualified personal loan resources:
Now, become a researcher for an hour or so. Take the time to seek out at least 5-7 personal loan lenders who say that they specialize in working with people with bad credit scores. Why go to the trouble? Because these lenders are much more likely than regular lenders to look past your FICO score and instead focus on other elements of your credit history.
5. Remember to get the agreed-upon value of your collateral item in writing before signing the loan:
After shopping around by contacting at least 5 lenders, it is time to accept the best offer you have received. While getting a low interest rate is important, do not sign any contract without first reading the fine print containing terms and conditions. Also, make sure you get the lender to write down the value of your collateral item on the contract in order to avoid "he said, she said" later.
Take these 5 tips into account as you seek out secured personal loan lending resources for bad credit individuals.
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