Education Center
Loan Calculators
Finding Personal Loans When You Have Low Credit Scores
Finding a personal loan that will give you the amount of money that you want or need to borrow isn't an easy task when you have low credit scores. Not only will your credit score determine how much money you can get, but also, it can determine how high the interest rate on the debt is going to be as well as how long you will be able to borrow the money for.
Really low credit scores can even prevent people from getting approved for personal loans. At the very least, these scores can lead to smaller sized loans with shorter terms and higher interest rates. None of this creates an agreeable situation for anyone but the lenders. However, consumers with low credit scores can obtain finance even if the rest of it is less than favorable.
Types of Personal Loans for People with Low Credit Scores
In general, as with most types of personal loans, consumers with low credit scores have access to the two basic types- secured and unsecured. Secured low credit personal loans provide slightly better interest rates and terms than their counterparts, the unsecured low credit personal loans.
With secured low credit personal loans, the borrower offers some type of collateral to secure the loan. This lowers the risk for the lender and leads to more agreeable loan terms such as lower interest rates. The property that is offered as collateral can be a motor vehicle, a home, real estate, bonds, jewelry, etc. If the borrower defaults on the debt, failing to repay it, the lender can repossess the collateral and sell it to cover the borrower's debt. The presence of collateral makes it more likely that the borrower will be able to receive approval for his personal loan.
With unsecured low credit personal loans, the borrower does not provide anything for collateral. Therefore, the lender takes on a bit of a risk when he provides funds to someone with low credit scores. This is why interest rates are generally higher with unsecured personal loans. Additionally, some borrowers might not be able to receive the full amount of money they are requesting with an unsecured loan.
Applying for an Online Personal Loan
Since so many online lenders are in business today, applying for an online loan has never been easier. With a secure online application, you could gain access to several different offers of personal loans, even if you have low credit scores. The healthy competition among online lenders provides easy access to reasonable loan terms even for those with less than stellar spending habits and credit histories.
