Secured loans with bad credit, What you need to know.
There are many reasons someone in dire financial straits needs to take out a personal loan, despite a poor credit
score. Unfortunately, the bad credit score makes it harder to secure a loan. However, bad credit does not make it
impossible to get secured loans with bad credit. Let's look at a few options.
Ability to Pay
Lenders who use automated underwriting rely heavily on your credit score. If the credit score is below a
pre-determined threshold like 700 or 580, they automatically reject the loan application. Manual underwriters
review the lender's circumstances and, most importantly, the borrower's ability to pay. For example, someone who
declared bankruptcy due to medical bills is a creditworthy risk if they have since returned to work. Someone whose
business collapsed can apply for a loan if he has found steady employment.
Lenders with manual underwriting will apply common sense to the application and approve personal loans for people with bad credit to those with an ability to pay. The key in these cases
is to only apply for a loan that is affordable given your circumstances. For example, do not apply for a mortgage
when the house payment, insurance and taxes would exceed a fourth of your take home pay, your income after taxes
are withheld. Your total debt load should never exceed 40% of your take-home pay.
Pay All of Your Bills
Their willingness to loan money is bolstered by a strong payment history on bills like your rent, utilities and
phone bill. Missing deadlines on small bills like your phone bill or childcare provider will give lenders pause
when you request a loan. Recovering Your Financial Reputation Potential borrowers can recover their financial
reputation by paying off debts they hold. A growing debt load will kill most loan applications.
A borrower paying down existing debt is a stronger candidate for a new loan. If you successfully pay off a
number of loans, lenders will be willing to consider issuing a new loan. For example, paying off a student loan or
tax debt will improve your credit score and eliminate the risk of the IRS garnishing your wages or seizing
property. Lenders do not want to loan money to someone struggling to pay debts to entities like the federal
government who have first dibs on your paycheck and assets.
Paying off debts and closing those accounts without taking on new debt will help you recover your financial
reputation. Lenders will then be more willing to loan you money, regardless of your credit.
Co-signers are people who agree to pay a debt if you are unable to do so. Lenders are more willing to issue
secured loans with bad credit if there is a co-signer with good credit. Your co-signer needs to understand that
they will be liable for the payments if you are late, and the co-signer will become wholly responsible for the loan
if you declare bankruptcy. Do not ask someone to co-sign for a loan if they will not be able to pay the payments in
full. You may gain a co-signer if you enter a separate agreement with the co-signer to repay them anything they are
forced to pay on the debt, if you miss a payment.
Use Online Lenders
Research online lenders instead of rushing to the nearest bank, title lender or payday loan office. Online
lenders are more likely to give you a long loan term, making monthly payments affordable. With the monthly payment
much more affordable, even those with poor credit are likely to be approved. However, online lenders have a number
of limits. For example, online lenders frequently limit loans to no more than $5,000.
You also need to run the online lender against the Better Business Bureau and scam reporting websites. There are
phishing schemes built around websites promising loans to those with bad credit so that individuals will enter in
all of their financial and personally identifiable information. Be wary of sites that ask you to send copies of car
titles or house notes to demonstrate proof of ownership of assets and collateral. This could be part of a scheme to
steal your property.Apply for a Secured Loan - Click Here