How to Get a Secured Personal Loan with Bad Credit
Did you know that you could qualify for a secured personal loan with bad credit, even if you’ve recently filed for bankruptcy, lost your home to foreclosure or had your car repossessed?
What Are Personal Loans?
Personal loans are any loan that is awarded directly to an individual, rather than a business, and used to cover personal expenses. Personal loans are especially popular with people who have financial https://worldloans.online/installment-loans-mi/ problems, and typically marketed as “bad credit equity loans“.
There are two distinct types of personal loans: secured personal loans and unsecured personal loans. Read on to better understand the differences between these types loans, and to find out which type might work best for you.
Secured Personal Loans
A secured personal loan is a loan in which the borrower leverages collateral or assets to gain access to money. If the loan is not paid back, that collateral then must be forfeited to the lender. Popular forms of collateral that people leverage in this way include cars, stocks and bonds, houses, valuable possessions or real estate.
Secured personal loans are very similar to collateral loans, in fact, they are virtually identical, except that collateral loans can be taken out by businesses, corporations and other non-personal entities, while personal secured loans refer explicitly to loans taken out by individuals. Bad credit secured loans are especially popular with people who have run into financial trouble in the past, mostly because they can be received without having to run credit checks, allowing individuals with severe financial problems to get a loan without having to pay penalties, put up more money as down payment or pay a higher interest rate because of their previous mistakes.
Lenders are willing to offer secured personal loans for people with bad credit, since the collateral involved provides them with an insurance against the borrower defaulting on the loan.
- Mortgages – Money is awarded to the borrower and the borrower’s home is used as collateral to secure the loan.
- Home equity lines of credit – Homeowners are awarded a line of credit and their property is used as collateral to secure the loan.
- Auto loans – The borrower is awarded a loan to purchase a car and the new car serves as the secured collateral for the lending company. – Borrowers take out a loan that’s some percentage of their car’s value, using their vehicle as collateral to secure the loan.
- Secured personal loans are relatively easy to get even for those with bad credit, because lenders often don’t require a credit check.
- Secured personal loans, even when made to individuals with bad credit, can often be provided with lower interest rates, since the collateral decreases chances that the lender will end up receiving nothing as repayment for the loan.
- Secured personal loans can usually be obtained more quickly than unsecured personal loans, since there is far less paperwork involved and the approvals process can be much faster.
- Because collateral is involved in the process, the borrower does risk the chance of losing their possessions if they are not able to make their loan payments.
- As with all loans, recipients of secured personal loans will have to pay back their loans with interest tacked on, and the longer the recipient takes to pay back the loan, the more money they will spend on interest payments.
Unsecured Personal Loans
An unsecured personal loan is a loan awarded to an individual without any collateral offered to the lender. Unsecured personal loans can be more difficult to obtain than secured personal loans since they don’t offer insurance to lenders, and in many cases, they also come with higher interest rates.
