There was a time when having bad credit score effectively meant that loans were impossible. However, these days there is always the chance of turning financial strife around, and regaining a good credit rating. It is widely accepted that personal loans help those with bad credit, and provide the stepping stones to a good credit score.
It is never really possible to have guaranteed personal loans with poor credit, but there are some things that can be done to greatly improve the chances of an application being successful. While there is a list of conditions that must be satisfied, the fact is that there are ways around some of the more problematic issues.
The first thing to do is to look at what some of those issues are, and by knowing what to look out for, it is more likely to see personal loans approved, with bad credit no longer the debilitating factor it seemed.
Reasons A Loan is Rejected
There are a few reasons why a loan application might be rejected by a lender. While it is certainly true that a personal loan helps those with poor credit on their way to financial recovery, the application needs to be carefully structured to appeal to the lenders.
Bad credit can put the applicant in a bad light, thereby reducing the chances of a guaranteed personal loan with poor credit. However, low ratings are not always caused by irresponsible money management.
Pointing out that circumstance was the cause of falling scores, such as a reduction in income, a job loss or even an unexpected financial emergency, can put the score in context for the lender. It is not unusual to see personal loans approved with bad credit as a result.
By stating the purpose of the loan, lenders are assured that the money is not to be wasted on unnecessary things. After all, personal loans help those with poor credit, by clearing credit card debt, or paying for sudden medical bills, but to finance a vacation in Las Vegas is irresponsible.
Finally, the size of the loan being applied for is telling, with lenders understanding that the applicant is beginning a structured approach to dealing with their poor credit.
Why Small Loans Work
The fact is that the closest thing to a guaranteed personal loan with bad credit is a small loan. The lender sees that the applicant has avoided the temptation to seek a big sum, and instead chosen a loan that is easily repaid. For example, a $2,000 loan can be repaid within a year at perhaps just $200 repayment per month. This is affordable and can be quickly repaid in full.
While $2,000 might not repay all of the existing debts, the chief benefit is that it allows a simple way to improve the credit rating. In this way, these small personal loans help those with poor credit, seeing them edge up the rating table.
Type of Short-Term Loans
There is a range of short-term and small personal loans to choose from. Collateral goes some way to creating a guaranteed personal loan with bad credit, since it provides security for the lender. But an unsecured loan, without collateral is more likely.
Other short-term loans approved with bad credit may be only a year or less, but a cash advance or pay day loan can be just a few weeks in duration. These are issued on the basis of an upcoming pay check, with the loan paid in full once the next one arrives.
Such personal loans help those with poor credit, but the terms and conditions are telling and the right one should be chosen carefully.