Getting a small personal loan for bad credit can sometimes be a real challenge. Still, there may find multiple online lenders willing to lend you (sometimes, despite your poor credit history). If you are looking for small personal loan alternatives with poor credit, there are two main loan sources that you might want to check out. They are both online payday loan lenders and banks. And although they are two of the easiest and fastest loan sources to get money from, they have some differences that might affect your decision. So, what factors should you weigh when deciding which one to use?
Apply for a Loan Online:The first factor you should consider is whether or not the lender will let you apply for a loan online. Most people don't realize that the internet is a great resource when it comes to applying for a loan. There are many more loan websites than there are loan brokers or loan officers. And applying through the internet does not typically require a fax or phone call. You may also find that you can get better terms and conditions online than with a broker or loan officer.
Positive and Negative Affect:Now, your overall credit score may affect your loan application negatively or positively. A loan for a small personal loan that you secure with your score may end up costing you a lot more money over the term of the loan. Banks will check with their rating agencies to see how you are fair as a borrower before offering you a loan. If your score is poor, they won't bother. They will, however, consider taking into account any other factors that could affect your ability to repay the loan, such as current debt levels and your likelihood of defaulting on the loan. This may cause them to offer you a high-interest rate loan, or a loan they may be unable to retract if you become unable to pay it back.
Interest Rates:If you apply for small personal loans for bad credit and you do not have any collateral, banks are more likely to give you a shot. However, your interest rates will usually be higher than if you had some form of collateral, such as a home. In addition, your lender may also ask for a larger repayment period. The reason is that unsecured loans carry more risk for the bank. They do this by assuming that you have nothing of value to keep them from getting their money.
When you apply for a loan and you do not have collateral to keep the lender from getting their money, it can seem like a very difficult situation to be in. On the surface, your credit score seems to be suffering. But if you look deeper, you'll see that this loan is a way for you to get your financial situation back on track. It gives you a second chance to start all over. After all, the financial problems might have occurred because of a poor financial decision. By taking out the loan, the lender is allowing you to repair your score.
Credit Score Matters:Many people think that if they have a small personal loan, then they will just have to spend the money on whatever they want. This is a mistake because the majority of lenders only deal with people who have a good credit score. These are the people who have been responsible for their debts in the past. So, if you want to get approved by one of these lenders, you need to have a decent credit score.
Credit Unions:One great source of unsecured small personal loans for bad credit scores is credit unions. Credit unions often offer loans at lower interest rates and longer repayment periods. This is because the larger the loan amount, the lower the interest rate, and the longer the repayment period, the lower the monthly payment amount. However, many borrowers do not want to be tied to any type of lengthy repayment plan. Therefore, you will probably need to shop around for the best possible interest rates on these unsecured small personal loans.
Use Online Lenders:Another option that you have for small personal loans for bad credit scores is to use online lenders. Online lending companies usually do not require loan approval and therefore there is no need for a small personal loan from the lender. Some online borrowers have reported saving up to 40% of their cash for their next purchase simply by using the money saved on their loan repayments. Therefore, online lending companies make an excellent option for borrowers who have a low credit score or for those who have a difficult time getting approval from traditional lenders.