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How To Get A Secured Personal Loan With Bad Credit

How To Get A Secured Personal Loan With Bad Credit

Having access to credit will become a necessity for most consumers at one point or another. If you already have bad credit as a result of financial difficulties, credit can normally be obtained with either a co-signer or collateral equal to one hundred percent of the loan value. Because of the secured nature of the personal loan, it should be possible to gain access to a nominal amount of funds to handle any financial situation. Other than the possibility of additional qualification requirements, the process of obtaining a secured personal loan will be similar to any other loan from a bank or credit union.

A consumer's best bet to receive a secured personal loan is to work with their existing financial institution. If you have checking and saving accounts in good standing you stand a better chance of making a good case for receiving approval for a loan. Your chances are even better if you already have an installment type loan like an auto loan or mortgage. Any personal item of value can be used to secure a loan such as a vehicle, home, boat, and investments like certificates of deposit or shares of stock and mutual funds. Come to your lender prepared to state your case with supporting information and documents.

A local bank or credit union isn't the only game in town for secured personal loans. Payday loans and title loan companies specialize in personal loans for consumers with bad credit. The same requirements will apply as going to your local bank but the terms will be less than optimal. These types of secured loans will have higher interest rates and shorter repayment times. If you only need a loan long enough to tide you over until your next paycheck then these loans can be acceptable alternatives.

There is one important drawback to any type of secured personal loan which is the possibility of losing the underlying asset. If a consumer defaults on a secured loan, the collateral used to back the loan can legally be taken as payment for the outstanding debt. This is exactly why a lender will be willing to issue a loan to a consumer with bad credit. They know that they are protected and stand to loose very little if the loan goes unpaid. The can take a vehicle, put a lien on a house or take any asset which was used to secure the loan in the first place.

When obtaining a secured personal loan with bad credit, be sure to read all loan documents carefully and ask questions about terms you don't understand. Try to repay the loan as quickly as possible and receive a signed invoice that the loan has been repaid in full. Most consumers have no trouble handling secured personal loans if used sparingly and for small amounts. They can be especially helpful when trying to repair credit or establish a credit history. Secured personable loans can be a great alternative when other types of loans aren't possible.

Image by: Kreg Steppe