Looking for a loan product despite a poor credit rating?  You can get a bad credit personal loan if you know where to look and what to offer lenders.  With so many individuals having bad credit but still wanting to borrow, banks know they have an audience for more expensive loan products.

Bad credit personal loans can be pretty painful.  You’ll pay  a high interest rate, with high fees if you are late or default. You may have to pay a prepayment penalty, which means if you pay off the loan early, you still have to pay the bank a chunk of the interest in addition to the principal balance.  And, you might have trouble without offering some kind of collateral, since an unsecured loan puts the bank in a very precarious position.  Still, there are ways to borrow money even with bad credit.  

Try to decide beforehand what you want the loan for, so you don’t just spend it all without knowing where the cash went.  If you don’t really need the cash for a specific reason, you might hold off until you have rebuilt your credit and can get better interest rates and terms from a bank.  Using the loan for debt consolidation is always a good reason, but only if you then close the credit cards or other debts that the loan pays off – instead of just adding more to your debt burden!  

Before you start applying for loans, find the best lender with the most favorable terms.  At the bottom of this page we have a list of lenders who offer a wide variety of loan programs to choose from, regardless of your credit.  You’ll want to look at the fine print too.  Ask about these fees and charges:

- Are you paying an up front application fee or processing fee?  Is there a fee to pull your credit?

- What is the interest rate?  What is the APR (annual percentage rate)?  Are they significantly different?  

- Do you have to provide collateral for this loan, or is it unsecured?  (How bad your credit is may determine whether the lender needs security or not.)

- How long until I have a decision? How long until you disburse the loan funds?

- If you turn me down, do you  have a related company that can do the loan?

Don’t just look at the monthly payment, because many hidden fees and charges can be included.  Make sure you compare all loan products before you apply with any particular lender – each time you apply for a loan, you will impact your credit score, so keep it to a minimum!

If you get turned down for unsecured credit, you might want to take a month or two and take steps to improve your credit.  You can take steps that show results within just couple months.

Trying to find bad credit personal loans is a catch-22; you have bad credit, and want to reestablish a good credit history, but no lenders will extend you credit because you have bad credit! If you have damaged credit, you’ve probably already experienced this problem.

However there is some help available. More lenders are realizing that there is a market for bad credit personal loans, for individuals who want to rebuild their credit by paying on time, with secured loan and credit card products, as well as unsecured bad credit personal loans for borrowers with poor or damaged credit.

You can begin to rebuild credit with secured loans. These are loans that are backed by your own funds, put into a savings account so that they accrue interest, but the funds act as security for your loan. For example, you put $1,000 into a savings account, and then borrow against it for a 12-month note. You make payments, and the bank holds the funds in case you default. 

Nearly every bank will set up a secured loan for you. It might seem like it does not make sense to tie up your own money, but it does give you an opportunity to show you can make payments on time, and have a “paid as agreed” on your credit report, plus you get your collateral back at the end of the loan, with interest! 

You can also use collateral such as your home to obtain credit, if you don’t already have a home equity loan. Some lenders will work with your bad credit just because they know that by taking out your home equity loan, you can pay off some of your cards, improving your credit score after getting the loan. 

Another option is to get a secured credit card. Similar to the loans, you deposit a smaller amount with the bank, say $300 or $500, and get a line of credit for that amount. Many times the fees can be high for these cards, so check the terms, and how to get your collateral released when you qualify for non-secured cards. 

Finally, there are lenders who offer unsecured bad credit loans. Using these lenders is a good way to show you can rebuild your credit, because the loan does appear on your credit report as unsecured debt. The terms might be high, but be sure to find out whether you can pay off the loan early without penalty and do so as soon as possible by paying more than the minimum monthly payment. 

Remember to investigate and compare all loan terms thoroughly before you apply!