Getting a Poor Credit Personal Loan
A poor credit personal loan is difficult to get because most lenders look at a borrower’s credit score and credit history and want to minimize their risks. While it is nearly impossible to find a bank that will give out a poor credit personal loan, there are some sources to consider.
- Peer to peer lending. Companies like Prosper offer loans through a social network of sorts. Your credit history will be available to the potential lenders, but there are no set criteria where a very low credit score might stop you from even attempting to get a loan. Peer lending networks generally have a ceiling on loans between $15,000 and $25,000 and the duration of loans is usually no more than 3 years. Here’s how it works: You explain what you need the loan for and even explain why your credit score is low. You also decide on the interest rate you will offer. Members of the peer network who are looking for a sizable return on an investment have access to that information as well as information on your credit history. Now, you can offer a 2 percent interest rate, but no one will be interested in buying a portion of your loan to only earn 2 percent. But a member can decide to invest in a portion of your loan. If enough members make that decision so that your loan is fully funded, you get the loan. The peer members get their share every month, plus the interest rate, for the life of the loan.
- Title loans. Lenders generally feel more comfortable with title loans, which is why they are a great source for a poor credit personal loan. You offer up the title to a piece of property such as your home, motor home or vehicle. A lender offers to give you a loan for a percentage of the value of the property along with an interest rate that is not as high as an unsecured loan with poor credit, for example. The lender feels more comfortable because of the collateral, and that explains the lower rate and the approval for a poor credit personal loan. However, if you default on the loan, you lose your property.
- Payday loans. It’s virtually impossible to find any financial expert who will say a kind word about payday loans, even as a way to secure a poor credit personal loan. The issue is that payday loans are what many experts call “predatory” loans. They take advantage of desperate lenders who are tired of being turned down for loans because of their credit history. The loan is usually for no more than your weekly or monthly paycheck and it must be paid back in full – plus interest – by the time you receive your next paycheck. If not, another sizable chunk of interest is added and you only have another pay period to at least pay off the interest. It’s possible for the amount owed to rise to astronomical levels by just missing a few payments. Borrowers should be exceptionally careful with payday loans, only going for a quick infusion of cash if they are certain they can repay the loan by the time they receive their next paycheck.