Bad credit or low credit score should not keep you from getting the loan you need.
This is what bad credit unsecured loans are for. Because these loans are issued by lenders that specialize in approving bad credit. You have a good chance of being approved for a loan.
There are bad credit lenders that require their applicants to submit a collateral for their loan. Houses or cars can be submitted as security for these types of loan.
But there are applicants who are unwilling to use their property as collateral.
As the name implies, a bad credit unsecured loans do not require the borrower to submit any form of security. Although unsecured loans often have higher interest rates, some borrowers use them because they do offer more convenience and flexibility.
Can bad credit unsecured loans help you improve your credit?
Yes, these loans can help you improve your credit. When you apply, ask the lender if they report your payment history to the main credit bureaus. Some do, some do not. Some will only submit payment history if you are late.
So if one of your goals is to not just get a loan, but to rebuild your credit. It’s important that you do your research! You want the lender to submit to all 3 credit reporting agencies. If not all 3, then at least 1.
Once you get approved, make sure that you always submit your loan payments on time. The easiest way to do this is to ask them if they will take the payment out automatically from your account each month.
Simple right. But that is easier said than done. One small mistake in timing can ruin all your efforts. But if you make your payments on time each month you will start to see your credit score increase!
Are bad credit unsecured loans recommended for everyone?
It depends on the applicant applying for the loan. Ask yourself, where will you spend the money? Do you really need it in a hurry? Can you wait a few months until your credit report has improved before you start applying for a loan?
If you have a very low score, you may want to take the time to improve your credit before you apply.
Keep in mind the amount you will qualify for and the interest rate you pay is dependant on your credit. And if there are a lot of errors on your credit report, you end up PAYING for those errors in the form of your interest rate.
Things to consider before getting a bad credit loan:
- Are you currently paying another unsecured or secured loan? If so, have you thought about asking them to increase your credit line before you go out and try to find another lender? If they are willing to do so, you can save your credit score from the extra pull.
- Have you set up a budget? Can you REALLY afford to take out a new loan?
- What are you using the funds for?
Remember, getting a bad credit unsecured loan doesn’t exempt you from your responsibilities as a borrower. If you get approved with a bad credit loan and you fail to keep up with your payments, you will just damage your credit further.