If you've been searching for a personal loan but do not have adequate credit or bad credit, you face an uphill battle. The first step is to get a copy of your credit report. You can order a free credit report from any of the three major credit bureaus. Finding out your credit score is often a daunting prospect as many borrowers fear what they might find on their credit report. More often than not, however, your credit score is actually higher than you might think. In addition, there are often steps you can take to combat any deleterious marks on your credit score. With time (and without additional bad credit) and diligence, you can raise your bad credit.
For the time being though, make the best of your situation and work towards making your financial goals a reality. Remember, a bad credit situation can happen to anyone. One way to obtain a loan with poor credit is with an unsecured loan for bad credit.
What is an unsecured Bad Credit Loan?
An unsecured loan is any loan that is not secured by any asset or equity in real estate. Typically, a loan is secured by some form of collateral – equity or a percentage ownership in a piece of property. In certain cases, a borrower has equity in a home but does not want to use this as collateral and therefore applies for an unsecured mortgage loan.
Because the loan is unsecured, the lender has fewer options if the borrower defaults – this becomes especially risky with a bad credit loan. In this case, it is difficult for the lender to recoup their investment. Unlike with a secured poor credit loan, the lender does not title to a property that would essentially serve as their insurance against default by the borrower. For these reasons, the interest rate on such a loan will be higher than traditional loans or even secured bad credit loans.
Interest Rate For Unsecured Bad Credit Loans
The interest rate will certainly vary according to several factors. The first is credit score. The lower the score the greater risk of loan default, thereby corresponding to a higher interest rate. The monthly income level of the borrower will certainly affect interest rate. How stable a borrower's financials are will certainly affect the interest rate. Another important factor will be the loan amount. Most bad credit lenders have rates that begin at 11% and can go as high as 17%. Add a few percentage points to this and you will probably have the basic rate for an unsecured bad credit loan.
The best thing for a borrower to do is get multiple quotes from different lenders. They are free and provide the borrower with valuable information on whether or not they are eligible for such a loan and how much they are going to be paying each month.
How Much Can I Borrow?
Every lender and lending institution sets their own minimum and maximum loan amounts. For an unsecured bad credit loan, the typical minimum is $ 2000 and can be as high as $ 50,000. Any loan amount above this will probably not be approved for risk reasons to the lender.
What Can I Use the Loan For?
Unsecured bad credit loans can be used for any reasonable purpose. In all likelihood, the lender will want to know what you need the money for. These loans are most often used to pay off accumulated debt, improvements or additions to a house or automobile, or even a wedding.
Unsecured bad credit loans can be difficult to pay back and should not be entered into unless the borrower is out of options and feels that they can comfortably pay back the loan.