Unsecured Loans With Bad Credit: Three Real Options

When a person falls on hard times, getting an unsecured loan is just one more mountain that looks impossible to climb. Though your traditional places for seeking a loan – banks and credit unions – may be unable to help, all hope is not lost. Even people with bad credit can get an unsecured loan from specialist online lenders who are happy to work with those borrowers who need extra help. Before you go looking for an online unsecured loan, however, make sure that you are educated about your choices and the lending process.

Defining Basic Loans

In the lending world there are two basic loan options. The first is a secured loan. This is when someone borrows money by using property as collateral, or insurance. Bad credit matters less in getting a secured loan because the value of the property leveraged gives the lender assurance that even if the debt obligation is not met, he will have something to show for his efforts.

The other option, and unsecured loan, is a far riskier proposition. In this case, the borrower offers nothing to the lender as assurance of repayment. Instead, the value of the loan is unsecured and subject to total loss should the borrower fail to provide timely repayment. Lenders are therefore highly suspicious of any borrower looking for an unsecured loan and having bad credit will demote you in their minds even more.

Unsecured Lending Options

All this does not mean, however, that you are completely left out to dry if you are a borrower with bad credit. Unsecured loans do exist for people like you and, in fact, come in several varieties. The key is figuring out which loan package suits your needs best and then finding the best possible lender to provide it.

Option #1: Personal Loans

Unsecured personal loans are the hardest to obtain with bad credit, but also the most versatile and safe. This is a traditional long-term loan that will give anywhere from $5,000-$25,000 to be repaid over a period of 5-15 years. Interest rates on these loans are not as high as some other options, but borrowers with bad credit will likely need to find a cosigner in order to qualify. If you have a reliable cosigner, however, this may be a great choice.

Option #2: Payday Loans

For times when you need a relatively small amount of cash quickly, payday loans present a real viable option. Generally given for $100-$1,500, payday loans are a short-term fix for cash flow issues. These loans carry higher interest rates, but that is primarily because they are only given for a very short period of time – generally 14-90 days only. If you take a payday loan, you will not be subject to a credit check, but you will also need to be sure you can repay your loan quickly.

Option #3: An Unsecured Credit Card

The final option available to borrowers with bad credit is an unsecured credit card. Though you will likely only qualify for a small line of credit at first, unsecured credit cards allow you the freedom to spend as much or as little of your credit line as you want without the burden of repayment of the whole. You can budget around your expenses. The interest rates on these cards can be quite high, however, so it is necessary to spend wisely.

Getting the Right Loan

When someone has bad credit, finding the right unsecured loan can be a challenge. However, there are clearly options out there to suit all needs and lifestyles. Make sure you review these choices before deciding which unsecured loan is the right choice for you.


Hard Money Home Equity Loans: Understanding Bad Credit Loan Consolidation

Hard money equity loans in the prevailing market are loans at a premium mortgage rate to the borrower in exchange for a “no red tape” 2nd mortgage loan. The money may be used by the lendee for whatever purpose they chose so long as the equity in the property or collateral provided is sufficient to cover the loan.

The term hard money loan initially meant a loan for hard cash. Today the term has been enhanced to cover loans for non-conventional loans such as investments, private funded loans, home equity loans and equity line of credit loans. Now it is possible to refinance your primary mortgage to get cash, consolidate debt and purchase investment properties instead of a taking out a purchase loan as a non-owner occupied investment property.

A maximum loan on property owned by the borrower is called a cash out loan. The borrower has a loan to value, which means the loan on the property, or collateral used is equal to the value of the property or collateral used to secure the loan. This type of loan has a higher interest rate than the “A paper” home equity loan that has a fixed rate around prime.

A home equity loan is one type of loan available for a hard money cash out loan. The Payment option negative ARM is another good 1st mortgage for investment properties if the borrower is looking for a short-term loan or if being self-employed has created some cash flow concerns.

A negative ARM mortgage calls for the payment of interest only on the loan. If the interest for a period is not paid in full the balance is added to the mortgage. The end result is an increased mortgage balance and a loss of equity in the property used for collateral. As the mortgage balance increases, the interest on the mortgage loan increases even though the interest rate remains the same. If both the loan balance and the interest rate increase, the property owner may be forced to sell or the loan may be foreclosed.

A home equity lender may require all or some of the following items before making a hard money loan.

1. A clear precise description of the property

2. Home Title to collateral

3. Borrower must show expertise in the field the loan will be used in

4. Mortgagor must accept all lender terms unconditionally

Because the interest rates are higher, and state laws may vary, borrowers should examine all ramifications before considering hard money loans.