Get an Unsecured Loan With Bad Credit: Facing Reality and Getting the Loan You Need

Anyone who has had the unfortunate pleasure of looking for an unsecured loan knows that it is no walk in the park. Lenders do not like giving money to people without any guarantee of its return. That's why getting an unsecured loan with bad credit is even more difficult since many lenders may use that bad credit score as a definitive excuse to refuse your loan.

However, the circumstances under which you fell into this bad credit score are as important as the score itself. As the borrower, it is your job to fill in the gaps for the lender and present your case as to why, unsecured loans are safe with you.

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Choosing an Unsecured Loan

With bad credit, you are in a far better position to get a loan if you seek out a secured lending option. That is, you look for a loan with collateral. In this sense, if you own a home, a piece of land or even a late model car or truck, getting a loan can be much easier indeed. Basically, by offering up some form of real value to secure the value of your loan, you give the lender a safety net that helps to cancel out the risk of your bad credit.

Unsecured loans, on the other hand, do not require the use of collateral. They are far less risky for the borrower because there is no fear of losing his property, but the lender is put at risk should the borrower fail to repay the value of the loan. That is why calming your lender's fears because of your bad credit is so essential.

Income Is the Key to Getting Your Loan

Because of the reality that is bad credit, you will need to offer your lender some reason to trust in your ability to repay your unsecured loan. The best way to do this is through a thorough budget that is supported by a substantial income. In other words, you want to show the lender just how much money you have coming in each month and just how much money you have to pay out. Then, you need to show him that you have the funds free to support your loan. The higher your income and the lower your current financial obligations, the more money a lender will offer you in your unsecured loan.

Facing Reality

Let's look at the facts: even with a high income, your bad credit score is a huge red flag. It tells a lender that you hit a hard financial time in the past and that is unsettling. Even if circumstances have changed, you present as a risk. Therefore, you need to be prepared for the penalties that come from asking for an unsecured loan with bad credit. This includes:

• Low Principle Amounts - consider any amount over $3,000-$5,000 a good catch. You need to build up lender confidence (and your credit score) before asking for more than

• Higher Interest Rates - Most people know that interest rates in the current economy are at historical lows. However, that benefit is not extended to people with bad credit. Be realistic and understand that the interest rate will be several points higher than anything you see on TV or a billboard.

• Higher Fees and Penalties - Because you had trouble in the past, it is likely that a lender will write in a clause that makes your late payment and missed payment fees much higher than average. Also be prepared for an interest rate jump.

Getting an Unsecured Loan

Looking for an unsecured loan with bad credit can seem like a never ending rat race. However, you can get a loan if you meet the right criteria and are prepared for the realities of your situation.

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