Without doubt, the most common type of loan applications that lenders must consider are for personal loans. By design, these loans can be taken out for any particular purpose, suggestion any suspicion is likely to prevent the transaction from going through. But the process is much more reliable, and loans of as much as $5,000 can be quite easily secured.
Of course, having a poor credit score is something that lenders are not going to ignore. It is, after all, their job to assess the reliability of the borrower, and ascertain whether they can be trusted to make the required monthly repayments on time. In such instances, personal loans with bad credit are issued, which are different in that their interest rate is higher.
The fact is that loans for people with bad credit will never be available on terms as good as loans to applicants with good credit, though online lenders are beginning to challenge that idea.
Small Loans for Personal Use
There is a general belief that personal loans are never available in large sums. After all, if a loan of $50,000 is needed, the purpose for such a sum is surely the purchase of a car, or home improvements or even loan consolidation. These purposes are covered by specific loan deals. A personal loan with bad credit, however, hardly needs to be very high.
However, there are some advantages to seeking a smaller loan from lenders. A traditional lender, like a bank, will have questions about all loans, but online lenders offer a no questions asked policy on some loans up to $5,000, even loans for people with bad credit. So long as the applicant has a proven income, and a bank account, the lender does not care what the money is used for.
Types of Loan
There are two types of personal loan to choose from, with each having very real effects on the repayment sum and schedule. The first is a secured loan, where collateral is provided as security against the amount borrowed. When seeking a personal loan with bad credit, this option is generally the best since the security gives lenders a greater confidence.
Collateral also means that the interest rate is generally lower, which is good news for the applicants. However, the fact that loans for people with bad credit carry with them far greater risk makes the lender pleased since any default can result in them having seizing the collateral.
The second type are unsecured loans, which basically means that the loan is approved with no collateral as back up. With this kind of personal loan the risk is higher, even if the applicant has excellent credit history. An unforeseen loss of job can throw the repayment plan into jeopardy, so when it comes to personal loans with bad credit that are unsecured, the risk is considered very high.
Lenders typically react to this level of risk by charging higher than normal interest rates. This can mean a huge increase in interest paid over the life time of the loan compared to good credit loans. There are better options when it comes to loans for people with bad credit.
No Credit Checks
Arguably the best personal loans to get are those what require no credit checks at all. And this is why it is considered a good idea to seek personal loans with bad credit form online lenders.
With loans of as much as $5,000 available credit check free, there is no need for an applicant to fear the impression their credit rating will make. Of course, loans for people with bad credit will always have some conditions, like proof of income, they are much easier to get than many believe.