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Overview
No matter how good or how bad the economy is, it's always a bit difficult to get a personal loan if you have less than stellar credit. The reason for this is obvious: If you fail to make your loan payments, the lender has few options for getting his or her money back. The only way you can be assured of getting a personal loan, regardless of how bad your credit is, is if you fully collateralize your loan. In other words, if you put up liquid assets equal to or greater than the amount you are borrowing, then the lender has no reason to deny your loan and should offer you excellent terms.
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Step 1
Get your collateral together. Your collateral can be cash in a checking or savings account. It can be a CD or money market account, real estate, a boat, or virtually anything that a lender is willing to accept to cover the full value of your loan. Keep in mind that hard assets, such as real estate, cars and boats, will need to be valued higher than the amount you are requesting since the lender would have to discount his or her value to get a quick sale and cover the loan if you were to default. -
Step 2
Approach a lender with your collateral. Since your loan will be fully collateralized, you can approach lenders who make top-quality loans at low rates. -
Step 3
Negotiate the best rates and terms you can. Since the lender has virtually no risk in making you a loan that is fully collateralized, you should demand excellent terms and a low interest rate. -
Step 4
Pay back your loan on time or ahead of time in order to maintain an excellent credit rating with your lender.
- Skill: Moderately Easy
- Ingredients:
- Cash or cash-equivalent collateral
- Tip: If your collateral is in the form of cash in a checking or savings account, the lender will freeze your assets so you cannot touch them until the loan is repaid in full.
- Tip: Your lender will demand control of any real estate or stocks or bonds so that you cannot lessen his value until after the loan is paid in full.
- Tip: If you put up property as collateral, expect to be asked to put up property valued at least 25 to 50 percent more than the loan you are requesting. The reason for this is because the lender may have to discount the value of your property to get a quick sale in order to repay the loan if you default.
- Warning:
- Even though your loan is fully collateralized and the lender will not lose money if you default on your loan, a default will still show up in your credit report if you fail to repay the loan on time.
