One of the great challenges in our current slow economy is getting money to help your cash flow after a series of blows to one’s finances.
Hundreds of thousands, perhaps millions, of Americans can relate to this problem. They want to achieve various parts of the American Dream, but their low credit score is holding them back. They are on the right track financially now, but they are paying dearly for past sins. And, as a result, some are trying to scale the very tall mountain of snagging an unsecured personal loans while having bad credit.
Bad Credit Options for Unsecured Personal Loans
People with poor credit opt for unsecured personal loans for a couple of reasons:
- They don’t have the collateral necessary to get a secured personal loan;
- They don’t want to risk losing the little collateral that they do have with a secured loan.
The problem with this approach is that very, very few lenders will give money to people with a low credit score and no collateral to minimize the risk of the loan. In fact, most unsecured loans are only given to people with near-perfect credit, not those with minimal scores.
As a result, some creativity is called for to obtain an unsecured loan for bad credit. The best option in almost every case is to approach a private lender. Financial experts counsel people seeking unsecured loans to turn to two sources: personal relationships and online lenders.
Let’s take a look at these two choices.
If you know a friend or relative who has some means, this can be a great way to avoid the damning credit check that other lenders will do on you. Obviously, this can be a tricky and humiliating process. It’s not easy to approach an older brother, a parent or a long-time friend for money. Such financial agreements can often hurt a relationship, but it doesn’t have to if you are seeking a reasonable amount and re-pay the lender on time, every time. If not, what relationship you did have with your friend/family member might be eroded for good. Also, if you need enough money to buy a home, for instance, few of us have family members with $200,000 lying around.
The Internet is full of online lenders that will take on people with bad credit. You need to dedicate some time to do research and compare rates, fees, service charges and other conditions among lenders, some of whom have ridiculous interest rates. You also want to get all of your personal information together before starting this process, because you will be giving each of the lenders the same personal details again and again, such as proof of residence, income history and bank account numbers.
Be sure to take more time to do background checks on lenders that award unsecured personal loans for people with bad credit. Get on the Better Business Bureau’s website and see what grade it gives the lenders that you are considering. You can also read user comments on the site. Most advisors would not counsel you to choose a lender that receives below a “B” grade.
When you have a low credit score, obtaining a personal unsecured loan is indeed like climbing a mountain. Be sure that you have the time and patience to see the process through to the end. Do not get discouraged by early rejection, but persevere and find a lender with terms that you can live with.