Loans For People With Bad Credit
Providing Personal Loans For People With Bad Credit

 
 

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

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.

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