Personal Loans and Bad Credit

One of the key determining factors in establishing the interest rate and terms of a loan and a loan’s basic availability is the prospective borrower’s credit. People with bad credit face more restrictions and disadvantages when attempting to secure a loan – and personal loans are not exempt. While having a high credit score may enable greater borrowing opportunities, people with bad credit may still be eligible for a variety of personal loans with a number of different terms and requirements.

Government data on the U.S. lending industry reveals an estimated 11 percent of loans consist of secured personal loans for consumers, a percentage that likely relies on borrowers with poor credit. By taking out a secured loan backed by equity, an automobile or other valuable possessions, those with bad credit may be able to obtain more attractive interest rates and convenient repayment plans.

Unsecured personal loans for borrowers with poor credit may also be available from some lenders, though particularly bad credit may result in less appealing loan conditions, including the maximum amount that may be borrowed. Recent interest rates for UK borrowers seeking small personal loans have reached over 20 percent, making repayment potentially challenging and forcing some loan seekers to offer collateral or seek credit rating improvement services prior to signing.

Bad credit is often a hindrance for securing an agreeable personal loan, but it does not make finding a suitable lender impossible. Whether through researching potential lenders alone, employing the services of a loan assistance agency or compromising on loan terms, borrowers with bad credit have several options for finding funding.