There are a variety of loans for people with bad credit available to choose from. One of the most popular options is unsecured bad credit loans. For people who don’t want to deal with providing collateral for a secured bad credit loan, unsecured bad credit loans are a great alternative. Like all bad credit loans, they have their advantages and disadvantages to them. In most cases the benefits outweigh the negative side, so depending on your individual circumstance, an unsecured bad credit loans might be ideal for you.
What are Unsecured Bad Credit Loans?
Unsecured bad credit loans are loans (usually for small amounts) that are granted without any form of collateral and are specifically geared towards people with bad credit. Unsecured loans are also referred to as signature loans in some cases because the borrower’s signature on the loan agreement signifies their promise to repay the loan or incur the penalties spelled out in the loan agreement. The reason a lot of people opt for these types of loans is because they don’t like the idea of putting up their personal belongings up as collateral. With secured loans, the borrower’s collateral can be seized by the lender if the borrower defaults on the loan.
If you have a bad credit history due to missed payments, foreclosure, short sale, etc. unsecured bad credit loans give you a chance to get the money you need if you hit a rough spot. Banks often times won’t grant loans to people with bad credit, so you will have to seek a bad credit lender to apply for an unsecured bad credit loan. The great part is that they are extremely easy to find online, and you can apply today.
Since people seeking unsecured bad credit loans have a bad credit history and aren’t offering any form of collateral, these loans will have higher interest rates than traditional loans. This is because lenders view borrowers of unsecured bad credit loans as high risk, so the interest rate will reflect that. Keep in mind that while your bad credit will affect the amount of interest you pay, it won’t determine whether or not you’re approved for the loan.
Advantages of Unsecured Bad Credit Loans
As mentioned earlier, unsecured bad credit loans don’t require the borrower to provide any collateral in order to be approved and get their funds. So if you get behind on your payments you don’t have to worry about having your car or home taken from you.
Perhaps the biggest advantage of unsecured bad credit loans is that they give people with bad credit a chance to be approved for loans as long as they have the ability to repay. Lenders who offer these loans are well aware that you don’t have the best credit, so they’re not concerned with your FICO score. Instead, they will be more interested in your employment status and ability to repay the amount you get approved for. Since banks and traditional lenders are generally unwilling to work with people who have bad credit, unsecured bad credit loans are a great option to get a loan if you have bad credit.
Also, paying back your unsecured bad credit loan on time and making sure that you don’t miss any payments will help you to rebuild your credit over time and reestablish your credit history. As long as your lender reports to the three major credit bureaus, you will start to improvement in your credit score over time. Since you most likely won’t be able to get car financing or a credit card, unsecured bad credit loans will probably be one of the best options available for you to help get your financial status back in order.