What is a High-Risk Personal Loan?

Malcolm Tatum
Malcolm Tatum

High-risk personal loans are financial tools offered by lenders who are willing to extend loans to people with poor credit ratings. Since the lender assumes a great deal of risk in extending personal loans of this nature, it is not unusual for both secured and unsecured personal loans to carry a higher rate of interest. While a high-risk personal loan is available to many people with bad credit, there are still basic criteria that must be met in order to qualify for this type of financial assistance.

A man getting a high-risk personal loan.
A man getting a high-risk personal loan.

As with any type of personal loan, the lender will set the qualifications for obtaining a high-risk personal loan. Often, one of the main requirements is stable employment. If the applicant is unable to provide proof that he or she is employed full time and has been with the same job for a specified amount of time, there is a good chance that the loan will be granted.

Along with steady employment, qualifying for a high-risk personal loan usually requires that the applicant make a minimum amount of gross pay each month. If the applicant does not make what the lender considers to be enough money to be able to handle the repayment terms associated with the loan, there is a good chance that the application will be denied. The applicant is often invited to try at a later date if there is some increase in monthly income.

The high-risk personal loan rate is normally higher than other types of loans. The exact percentage of the interest rate will vary, depending on the rate of interest that is allowed at the time the loan is granted. Secured personal loans that are considered to be high risk are not likely to carry an interest rate that is lower than the rates extended for an unsecured high-risk loan. However, there are exceptions, with some high-risk lenders specializing in granting unsecured loans to high-risk applicants.

People sometimes use a high-risk personal loan as a means of initiating credit repair. This is often the case after the individual has gone through a period of financial reversal. When this is the main reason for the loan, it is a good idea to compare personal loan plans and go with a lender who does report to all the major credit reporting agencies regularly. Assuming the payments are made on time, the loan activity will create a positive entry on the credit report and help to offset some of the negative entries that are also present.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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Discussion Comments


Can an unsecured loan lender request the first 'repayment' prior to the funding of the loan? Many companies are stating we must first pay the first payment on the loan prior to the funding.

We are new residents to the UK with no credit history and are applying for a personal unsecured loan after many of the banks have refused us.

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