Bad Credit - Unsecured

Bad Credit Unsecured Loan
Unsecured Loans Bad Credit History

Having a bad credit history can prevent a person from getting an unsecured loan. Banks and other traditional lenders usually don’t make unsecured loans to those with bad credit. These lenders consider people with bad credit too much of a risk to loan money to.

Banks are reluctant to make unsecured loans to people with bad credit because no collateral is involved. A person with bad credit can usually get a secured loan in which the borrower puts up collateral. In an unsecured loan there is no collateral to seize or repossess if the borrower doesn’t pay the loan.

A bad credit history indicates that a person has defaulted on loans, made payments late or missed payments on existing loans or credit cards. Applying for a lot of loans or credit cards can also drive down a credit score and make a bad credit history worse. Some people are able to improve their credit scores by challenging negative information in their credit history.

Loans for people with bad credit histories

There are quite a few lenders that specialize in making unsecured loans to people with bad histories. These lenders are willing to loan money to bad credit histories because they know that a bad credit history isn’t necessary an indication of poverty. Credit histories are based on a person’s record of repaying loans and credit cards not a person’s income.

Most of these lenders will require a person to present proof of income before making a loan. Proof of income can be pay stubs or banking records. Some lenders will require that a person applying for a loan sign an agreement that they will make payments on schedule. Others will forgo a credit check if a person agrees to pay the loan back quickly.

Look for lenders that don’t run credit checks

People with bad credit histories should look for lenders that don’t require credit checks when they are looking for an unsecured loan. Credit checks should be avoided because running a credit check can cause a person’s credit score to fall. Some credit bureaus will take several points off a credit score every time a credit check is run.

Fortunately, there are many lenders including online lenders that don’t require credit checks. Typing the words unsecured loans bad credit history into a search engine can help a person locate these lenders. Look at these lenders closely because not every lender loans money in every area.

Higher interest rates and tougher terms

Those with bad histories will probably have to pay higher rates when they take out an unsecured loan. Many lenders loan to such people because they know that they can charge persons with bad credit higher interest rates. One way a person with bad credit can get a better interest rate is to shop around and compare loan offers.

Lenders generally impose tougher terms on loans to people with bad credit histories. One example of these terms is the requirement that the borrower allow the lender to take the loan payment amount directly from their bank account via electronic banking. Another is a requirement for automatic loan payments that are taken out of the borrower’s account every month.