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Securing Personal Loans With Bad Credit Scores: 3 Options To Consider

June 04, 2012 | Comments: 0 | Views: 142

For people hoping to secure personal loans with bad credit scores, the rules of application should mean that chances of seeing their loan application succeed is very unlikely. But the world of financing and lending has changed greatly with the rise of the Internet.

The obstructions that once convinced those with low scores to forget about applying for loans have effectively been removed, and in more ways than one. This is because securing financing from lenders no longer means going into a bank, for example, and asking them to consider the application. There are alternatives.

Certainly, online lenders are more approachable for consumers in general, but the range of personal loan types available, such as easily available payday loans, means there are ways around application problems. So, the problems of getting the funds needed are not as significant as they once were.

The Online Option

The Internet has changed lives and living in numerous ways, not least in how we can secure personal loans with bad credit scores. While traditional lenders have tended to stick to their age-old criteria, the Internet has freed up the possibilities for everyone. Online lenders are more flexible in their terms, charge lower interest rates than banks and can approve a loan faster.

Of course, there are criteria to meet if there is to be any chance of securing financing from lenders. First of all, proof of income and regular employment is essential, while having a bank account is also a must.

While interest rates are more competitive than those charged by traditional lenders, they are still higher than those charged to applicants with good credit scores. But, because these personal loans are structured especially for bad credit applicants, the online lender is considered the best option.

The Payday Loan Option

In recent years, the payday loan has been regaining a positive reputation, perhaps because of the ease with which they can be secured. In fact, for those consumers seeking personal loans with bad credit scores, a payday loan is probably the easiest to get.

This is principally because the credit score is ignored, with security provided by the paycheck of the borrower - thus the name. Logically, securing financing from lenders will require proving an ability to meet repayment schedules, but this kind of loan is usually repaid in one sum, taken out of earnings that month.

However, interest rates are very high (some charge 30%), loan sums are limited to around $1,500, and the pressure to repay in one go means there is little room for renegotiation. In essence, this kind of personal loan is little more than a very expensive cash advance.

The Bidding Option

A third option to consider smashes the traditional idea of loans and lending. It is now possible to bid for a loan online, making it possible for people to secure even large personal loans with bad credit scores hanging over their heads.

The system works by borrowers making a loan proposal on a website, on which members of the site will bid an interest rate and terms. The borrower can then choose the best of those bids. Traditionally, securing financing from lenders involved hoping for the best, but this method puts the borrowers in charge.

It also means that a personal loan, perhaps as large as $10,000, can be secured are lower than market value, which is excellent news for borrowers. It lifts not just the amount of debt on their shoulders, but also makes the monthly repayment much more affordable.

Sarah Dinkins is a financial advisor who writes about Guaranteed Unsecured Credit Cards and 100% Guaranteed Bad Credit Loans.

Source: EzineArticles
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