What are the Different Types of Personal Loans for People with Bad Credit?

There are a number of options available for personal loans for people with bad credit. There are programs designed to loan sums of cash to those with bad credit ratings; however, consumers should be aware that there is a price to pay in the form of higher payments and more difficult repayment terms. The types of loans available depend on the lender, but options include secured loans and payday advance loans. In some cases, the type of loan a borrower can get and its interest rate are determined by how low the borrower's credit score is.

People with bad credit do have several options when a loan is needed to cover an unforeseen event such as a medical bill or money for repairs to a home or automobile. It’s up to consumers to carefully research lenders before applying for a personal loan so that they don’t get hit with ridiculously high fees or impossible repayment terms. It’s also important for applicants to read all contracts and understand the terms before accepting any loan.

Personal loans for people with bad credit vary based on the credit score of the person applying for the personal loan. If the score is very low, the lender will often require a second party to co-sign on the loan or ask for collateral in the form of substantial personal property or real estate. Likewise, if there are multiple judgments or a bankruptcy on the borrower's credit history, this can be a red flag for lenders. Consumers should keep in mind that a bad credit rating is considered more risky for a lender.

One possible option for people with bad credit is a secured personal loan. The secured loan requires a deposit of a predetermined sum of money that is held in escrow until the loan is repaid. This can be a good way to rebuild credit and is often offered as an option by legitimate financial institutions and credit card companies. Once the terms of the loan are met, the deposit is returned and the account can be transferred to an unsecured personal loan or line of credit for future use.

Other loan options for people with bad credit can include payday advance loans or car title loans. These loans are the quickest type to get, making them useful for an unexpected emergency, but they also often have the highest interest rates. In recent years, several well-known loan companies of this type were criticized for having unfair lending terms.

Personal loans for people with bad credit can also be obtained from a local bank or credit union in some cases, especially when the borrower already has a business established relationship with the institution or property is presented as collateral. Personal loans that are taken out in advance of receiving a tax return or another financial windfall may be available in certain circumstances. These types of loans may have lower interest rates, but they may require repayment in a shorter period of time or upon receipt of the anticipated funds.