You can still get unsecured loans with bad credit
Print View - Published: Sun, 4 Nov 2012 at 4:58 AM
Applying for unsecured loans with bad credit is still possible and there are several companies that offer this type of loan at this moment in time. However, prior to applying for one, it may be best if you fully understand the differences in these loans that will occur due to having a bad credit rating.
To begin with it is a good idea to recap as to what an unsecured loan actually is because you will have the option between this and a secured loan. Basically, a secured loan is tied against something of value such as your house or a vehicle whereas an unsecured loan is not dependent on having any kind of asset. Instead, they look at your income and use that as a guide as to whether or not you can afford the loan.
So what things do you need to be aware of with unsecured loans when you have bad credit? First, you are going to be hit with a higher than normal interest rate, but this is because you are looked upon as being someone who is riskier to lend money to. A normal loan for good credit will typically vary anywhere between 6% and 10%, but the interest rate for this type will often be anywhere from 20% up to 50% APR depending on the company you use and how poor your credit rating really is. You will also find that there will be limits on how much you can borrow at any given time and these limits will be substantially lower than a normal loan, but they will vary between companies and it is, therefore, worth looking around the market before applying.
When applying for this type of loan you will find that they look at your income and in order to qualify they will often request that you earn above a minimum amount each month. They can also ask you about any other loans or payments that you need to hand out each month as they then use this information to see if you are just simply digging a bigger financial hole for yourself. Apart from this, you will need to be over 18 and have a bank account, but everything else is generally the same as it is with a normal loan.
The key thing to do if you are searching for an unsecured loan even though you have bad credit is to shop around and compare rates and how much they can offer you as you can save yourself some money whilst still getting the funding you require. Yes you will need to pay more due to your previous history, but at least you know that there are companies out there still willing to lend money to you and it is just a case of searching for them and applying to the one you like best of all.
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