About Bad Credit Signature Loans
July 31, 2010
Quite honestly bad credit signature loans are one of the hardest loans to qualify for. Because a signature loan is usually based on good faith and your ability to pay the loan back, there is no collateral put up to guarantee the lender that the loan will be repaid. In fact, the lender's only course of action to collect on a delinquent account is through the court system and will end up costing filing fees, attorneys etc.
There are some financial institutions out there that specialize in people with bad credit situations all the time. But beware of the interest rate that these lenders carry. If you have bad credit than the lenders will automatically consider you a high-risk borrower for bad credit signature loans. They know that in most cases, you're going to be in a desparate situation and will probably sign on the dotted line, not paying much attention to the fine print.
Always try your bank or credit union first. They may offer some solutions to your financial hardship such as a secured line of credit. This type of loan will ask that you put up some form of collateral such as a title to a vehicle or the equity on your home. These loans are considered much less risky to the lender and will therefore carry a lower interest rate and a higher chance of approval.
Most high risk personal loans are only for small amounts (maximum is usually $2,500) but can be used however you see fit. The key to any of these loans is to pay the amount back in a timely fashion. On time monthly payments are a great way to rebuild your credit score. Make sure that which ever lender you decide to use reports to the three major credit agencies, Equifax, Experian and Trans-union. Then, try to keep the account open and revolving for at least six months.
This is usually the minimum term that most lenders will allow before reporting to the credit agencies. Also, after six months of timely payments, look into refinancing the loan for a lower interest rate. Most companies will offer the option to refinance after they have seen dedication and good payment history on your behalf.
This will also make it much better for you to establish a relationship with your bank, making borrowing money, getting a quick personal loan, in the future much easier.