Personal Loans For Poor Credit – How to Find These Affordable Loans
For individuals with bad credit, obtaining a mortgage, small business loan, auto loan, or student loan can be quite difficult. Since a personal is completely unsecured and viewed by the banks as a riskier loan, obtaining a personal loan with poor credit from a traditional lender is nearly impossibly. While traditional lenders may reject the personal loan applications, there are other options for individuals with poor credit to obtain a personal loan which include opening a secured personal loan or going through an online micro-lender.
The first option for obtaining a personal loan with poor credit is opening a secured loan. Opening a secured loan will require you to open a CD or savings account with a bank, which will then give you a personal loan and use the CD or savings account as collateral. With a secured loan, the bank will normally allow you to borrow up to 95% of the CD’s or saving account’s value, but will not allow you to withdraw from the fund until the loan is paid off. Secured loans are a good option because the interest rates are normally just 1% – 2% above the savings rate. A disadvantage of this loan is it requires the borrower to have enough savings to open the savings account.
Another option for getting a personal loan with poor credit is through an online micro-lender. Online micro-lenders are networks of individuals who look to invest by lending money to individuals who can’t get traditional loans, or want to avoid a bank’s paperwork. More often than not, your lender will be hundreds of individual people sharing the risk of lending to you. The website acts as a broker between the borrower and lender. The advantage of using micro lending is that you will be able to get a loan, but unfortunately the micro-lenders often charge up to 25% interest.
