Personal Loans for Bad Credit – What You Need to Know
If you are in need of some extra cash but have poor credit, a personal loan for bad credit can help you achieve your financial goals. A bad credit loan may be better suited for tackling debt consolidation. These loans are designed to make your monthly payments more affordable and reduce the stress of a large debt. But before you apply for a personal loan, consider your needs and crunch some numbers. The best personal loan for bad credit will improve your life, not add more stress.
There are two types of personal loans – secured and unsecured. Both affect a borrower’s credit in the same way. Upon applying for a loan, the lender will look up the borrower’s credit reports to determine their repayment history, credit card limit and balance, and any negative information.
These reports are filed by consumer credit reporting agencies like Experian, TransUnion, Equifax, and Experian Home Mortgage. The higher the credit score, the better the loan application approval and APR rates.
Secured loans require collateral. A home or car can serve as collateral. If you default on a secured loan, the lender can seize the collateral and keep it as payment. Repossession can stay on your credit report for seven years. Unsecured loans do not require collateral, but they still charge interest and fees. Examples of unsecured loans include credit cards and revolving accounts. While unsecured loans are easier to obtain, you may have to pay a higher interest rate if you do not have enough collateral.
High interest rates
While bad credit is an unfortunate situation, it does not mean you cannot obtain a personal loan. If you have a good credit score, you will most likely qualify for a lower interest rate and fewer fees. Having a cosigner with good credit …