Can People With a Poor Credit Rating Get Personal Loans?

By Stephanie Mojica

  • Overview

    Though today's economy makes it much harder for people with bad credit to get personal loans, it is still possible under the right circumstances to borrow money. Qualifying for a personal loan with bad credit can be difficult, and is best attempted by people with a solid job and steady income. It is easier to get a personal loan on cars and houses than for general purposes. However, there are lenders who will offer smaller personal loans to people with bad credit, whether or not they have collateral.
  • Background

    A personal loan is paid off in fixed monthly installments over a specific period of time. Some loans offer checks upfront. Others allow the borrower to use a car or live in a house and pay it off as he would a general loan. The main difference is that lenders are more willing to lend to people with bad credit who are buying some kind of property or already own a car or house. This is because if the borrower defaults, which is much more likely in bad credit customers, the lender can easily have recourse without going to court.
  • Auto Loans

    The best way for someone with bad credit to get a personal loan for a car or truck is to visit his local bank or credit union, or a car dealership. Keep in mind that if you do not make your loan payments, the lender will repossess your car and you will not be able to get past money paid back. A bad credit personal loan for an automobile usually requires at least $1,000 down, depending on what kind of car is desired.

  • Mortgages

    Many lenders are willing to loan bad credit clients money to buy a house, because they can foreclose upon the property if payments are not made. Those with bad credit will need to make a down payment of at least 5 percent of the house selling price, and sometimes as much as 20 percent. Keep in mind a lot of documents are required for these kind of bad credit personal loans, such as bank statements, income tax returns and pay stubs.
  • Secured Loans

    A general-purpose secured loan is ideal for a bad credit borrower who already has equity in a house or car, or has assets such as retirement accounts or stocks. Many banks and credit unions will gladly lend to people with collateral, regardless of credit, with fairly good interest rates. However, if the borrower defaults on the loan, she will lose the collateral she used to get the loan.
  • Unsecured Loans

    Unsecured personal loans for general purposes, furniture, computers or jewelry do still exist in today's market. However, many have extremely high interest rates. While it is rare to lose property purchased with an unsecured loan, it can happen. Lenders such as American General (see Resources) and local banks and credit unions tend to offer loans of around $1,000 to most bad credit customers.
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