Common Types of Personal Loans

There are actually quite a few different types of personal loans for bad credit. Signature loans and payday loans would both fall under this category. If your credit is fair to poor, it may be difficult to secure a signature loan. With this type of loan, the bank doesn't require collateral which is a higher risk for them. If you don't need a huge loan, a payday loan may be a more viable option. With a payday loan, the lender won't do a credit check. They will instead verify that you have a job and a checking account.

Personal Loans For Bad Credit

Bad credit personal loans are going to carry a higher interest rate than loans for people that have good credit. For some people, it might be difficult to get a loan of this type. The bank obviously isn't going to loan to a person that will make them take on too much risk. While personal loans for people with bad credit are a solid income stream, most banks are going to limit the amounts they will loan out to cover their risk.

Unsecured Personal Loans

There are a few different types of unsecured personal loans that are available. Signature and payday loans would fall under this category. Both are loans that require no collateral. Since the bank takes on more risk when they give unsecured personal loans, this loan type carries a higher interest rate than secured loans.

There are online and off-line institutions that provide these types of loans. For signature loans, you can visit your local bank or a large online lender. For the payday type, you can visit a payday loan store in your area. Caution: Payday loans are often quite expensive.

High Risk Personal Loans

High risk personal loans are called payday loans by most people. This type of loan is extremely risky for the lender because the credit of the borrower isn't checked. This means of course that people with poor credit gravitate to this type of loan. To hedge their risk, the lender will often charge a near-obscene amount of interest. This helps them to bank a lot of cash from this group of loans, which they use to pay for the loans that default.

If you're trying to find personal loans with bad credit, this may be the only type that's available to you.

Secured Personal Loans

Secured personal loans are a great option for individuals that have assets that can be used as collateral. Common assets that people use as collateral for secured personal loans are homes, land, stocks and bonds, or insurance policies.

Since the bank is taking less risk when they provide secured personal loans, they will often provide the funds at a lower interest rate. For individuals with great credit, this type of loan will usually provide the best interest rates of any type of loan out there.

Guaranteed Personal Loans

When people talk about guaranteed personal loans, they are usually referring to payday type loans. This type of loan is available to anyone, regardless of credit history. The lender will usually verify that the borrower has a job and a checking account. The funds are usually direct deposited to the borrowers checking account and the payments are then withdrawn from the borrower's checking account. These loans often have very high interest.

Poor Credit Personal Loans

Poor credit personal loans are pretty hard to come by. Payday loans and collateral based secured loans are about that only options if you have poor credit. If your credit is poor, you can expect to pay more interest than everyone else. Work on your credit to secure better rates.

Outside The Realm Of Possibility Loans

People often ask me about ridiculous loans they wish that can get. Some people have crap credit and aren't willing to pay high interest. I have an idea, why don't we start offering free bad credit personal loans. We'll take everyone with terrible credit and give them no interest loans. Come on people, banks have to make money. That's kind of the point. Oh, maybe we could also offer no credit check personal loans with no interest. Ha!

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Posted in Financial Services Post Date 10/27/2020


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