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Personal Loans: Sources for Personal Loans even with bad credit
by rebuildcreditscores.com
by rebuildcreditscores.com
The Basics and Sources of Personal Loans
Personal Loans are Unsecured
Personal loans are not secured against the borrowers assets. No collateral is necessary.
Qualifying for a Personal Loan
Because personal loans are unsecured and approved without any collateral, underwriting
guidelines may be strict. The lender is taking a substantial risk because there is no security or
collateral the lender can seize if the borrower defaults on the loan. Borrowers with high credit
scores and good repayment histories are likely to be approved at low interest rates. Borrowers
with lower credit scores may still be approved; however, the interest rate will be much higher.
Credit scores range from 300 to 850. An unsecured loan with a credit score under 620 is
considered low. Borrowers with lower credit scores may have to consider getting a bad credit
personal loan.
Banks
If you have a long term established relationship with your banker it may be a good idea to
begin looking for a personal loan at that institution. Your credit scores will be the primary
determinant but a good banking relationship can sometimes sway a decision in your favor if
you have a few late payments on your credit report. The relationship could be in the form of a
checking or savings account, a Certificate of Deposit, a mortgage loan, or business banking
accounts. Stable, long term employment will also weigh heavily in your favor.
Credit Unions
Loan products from credit unions often come with lower interest rates because credit unions
are non profit organizations. Credit unions often only run one credit report in making decisions
to grant credit. Experian is typically the credit bureau used. The credit criteria is usually less
stringent than traditional banks.
Friends and Family
It's never a great idea to borrow money from friends or family; however, if done professionally,
the arrangement may be mutually beneficial. You may be better able to convince your friends
or family to make a loan if you have formal loan documents drawn up. A fairly new website can
aid you in this process. Virgin Money structures formal loans between friends and family. It is a
person to person lending service that manages the personal loans you make with people you
know. Virgin Money can also report loan payments to the alternative credit reporting company,
PRBC.
Credit Card Companies
Many credit card companies are offering new customers “promotional” or “teaser” rates. These
rates are very low and sometimes even zero percent interest. The rates can last from 6 to 12
months. These types of credit cards can function as a short-term loan for an amount up to
your credit limit. If the promotional rate is less than 12 months you can always call the credit
card issuer and request a longer term. They may raise the rate a bit but it still may be worth
the long term benefits of having a very low interest credit card. Credit card companies will
compete for your business if you have good credit. Don’t be afraid to use your good credit as
leverage. Just make sure the promotional rate applies to both cash advances and charges.
Loan Amount
Unsecured personal loan amounts vary from lender to lender but the typical loan amount
ranges from $1,000 to $15,000. Some lenders will go as high as $25,000 for an unsecured
personal loan.
Loan Terms, Rates
It is best to shop around because loan terms vary considerably. Call around or shop online to
find out what the terms are. Rates may vary from 7% to 20% depending on your credit score,
employment and assets. Generally personal loan terms can range from 1 to 4 years. Longer
term loans are available and your monthly payment will be lower; however, you may end up
paying more in finance charges over the life of the loan than you would on a shorter-term loan.
The longer the term, the more you will pay in interest.
Personal Loans are Unsecured
Personal loans are not secured against the borrowers assets. No collateral is necessary.
Qualifying for a Personal Loan
Because personal loans are unsecured and approved without any collateral, underwriting
guidelines may be strict. The lender is taking a substantial risk because there is no security or
collateral the lender can seize if the borrower defaults on the loan. Borrowers with high credit
scores and good repayment histories are likely to be approved at low interest rates. Borrowers
with lower credit scores may still be approved; however, the interest rate will be much higher.
Credit scores range from 300 to 850. An unsecured loan with a credit score under 620 is
considered low. Borrowers with lower credit scores may have to consider getting a bad credit
personal loan.
Banks
If you have a long term established relationship with your banker it may be a good idea to
begin looking for a personal loan at that institution. Your credit scores will be the primary
determinant but a good banking relationship can sometimes sway a decision in your favor if
you have a few late payments on your credit report. The relationship could be in the form of a
checking or savings account, a Certificate of Deposit, a mortgage loan, or business banking
accounts. Stable, long term employment will also weigh heavily in your favor.
Credit Unions
Loan products from credit unions often come with lower interest rates because credit unions
are non profit organizations. Credit unions often only run one credit report in making decisions
to grant credit. Experian is typically the credit bureau used. The credit criteria is usually less
stringent than traditional banks.
Friends and Family
It's never a great idea to borrow money from friends or family; however, if done professionally,
the arrangement may be mutually beneficial. You may be better able to convince your friends
or family to make a loan if you have formal loan documents drawn up. A fairly new website can
aid you in this process. Virgin Money structures formal loans between friends and family. It is a
person to person lending service that manages the personal loans you make with people you
know. Virgin Money can also report loan payments to the alternative credit reporting company,
PRBC.
Credit Card Companies
Many credit card companies are offering new customers “promotional” or “teaser” rates. These
rates are very low and sometimes even zero percent interest. The rates can last from 6 to 12
months. These types of credit cards can function as a short-term loan for an amount up to
your credit limit. If the promotional rate is less than 12 months you can always call the credit
card issuer and request a longer term. They may raise the rate a bit but it still may be worth
the long term benefits of having a very low interest credit card. Credit card companies will
compete for your business if you have good credit. Don’t be afraid to use your good credit as
leverage. Just make sure the promotional rate applies to both cash advances and charges.
Loan Amount
Unsecured personal loan amounts vary from lender to lender but the typical loan amount
ranges from $1,000 to $15,000. Some lenders will go as high as $25,000 for an unsecured
personal loan.
Loan Terms, Rates
It is best to shop around because loan terms vary considerably. Call around or shop online to
find out what the terms are. Rates may vary from 7% to 20% depending on your credit score,
employment and assets. Generally personal loan terms can range from 1 to 4 years. Longer
term loans are available and your monthly payment will be lower; however, you may end up
paying more in finance charges over the life of the loan than you would on a shorter-term loan.
The longer the term, the more you will pay in interest.
| Example |
Chart Source: Financial Finesse
 |  |  |  |  |  |  |  |  |  |
Personal loans, also known as signature
loans are a great way to consolidate debt,
make home improvements, pay for special
events or even take that much needed
vacation.
Personal loans are usually unsecured loans
and this may make a personal loan a little
more difficult to obtain.
The decision making will primarily depend on
your credit score. The better your credit
score, the better interest rates and terms
you will get. There are bad credit loans
available but they come with higher interest
rates.
loans are a great way to consolidate debt,
make home improvements, pay for special
events or even take that much needed
vacation.
Personal loans are usually unsecured loans
and this may make a personal loan a little
more difficult to obtain.
The decision making will primarily depend on
your credit score. The better your credit
score, the better interest rates and terms
you will get. There are bad credit loans
available but they come with higher interest
rates.
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