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Loans For Consumers With Bad Credit Explained

Jun 17, 2008
If you have bad credit, there's little chance you'll be able to secure a loan without horrendous interest rates. In some cases, lending institutions won't even give out loans at all to those who have poor credit ratings. Thankfully, there are a few options for just such people to obtain a loan regardless of their credit score.

The most negatively famed type of loans would be the payday loan. The payday loan is popular for creating cycles of debt which are hard to escape. In proper situations, they are perfectly safe- but missing one payment could trigger an onslaught of debt. Payday loans are also popular for predatory lending, which can hurl consumers in debt faster than they realize. As a result, payday loans are generally considered to be last resort loans- even for those with bad credit.

Secured loans are a bit better of an idea for borrowers with poor credit. Secured loans actually require that the consumer has something of value, however. This can be a car or a home- and in some cases, even proof of responsibility in paying one's rent can be act somewhat as a type of security. In any case, consumers benefit from the secured loans as they are less of a risk in the lender's eyes.

Charismatic personalities can sometimes talk their way into a loan, even with the history of bad credit. As long as a proper plan is drawn up, it remains concise, and details one's budget and repayment plan, lenders will sometimes put more trust into the borrower. This option doesn't work for everyone, as it requires a motivated personality and the ability to influence others- as well as proper negotiation tactics. Borrowers will find that these characteristics will take them a long way in the finance industry.

If borrowers own a mailbox or some form of mailing address, they probably are already familiar with preapproved credit cards and other forms of loans. It's not hard to get multiple offers each week- but instead of trashing the offers instantly, take the time to look through a few to see the offers each credit card entails. Some lenders are designed especially for catering to borrowers with poor credit, and some offers are literally too good to pass up. Be on the lookout for scams and hidden fees or predatory lending, however, as these can be all too common in the industry.

Poor credit or no credit at all is best remedied by relying on one's friends or family members. Such friends and family can cosign a loan, and promise to help out if the original borrower can't make a payment. This helps lenders help reduce risk, and gives the original borrower better credit- as well as the loan they need for whatever purpose they require it for.

Closing Comments

The financial industry is more lenient to those with bad credit than most would think. This is especially true in the case of lending institutions that allow bad credit loans to be offered on a constant basis. As borrowers will find, lenders are just as eager to give out a loan as borrowers are to obtain one. Knowing how to negotiate and how to be charismatic can mean all the difference in the process.
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