Bad Credit Personal Loans

There are quite a few different types of bad credit personal loans out there and in order to provide you with the best explanation possible, we will talk briefly about each of them.

Bad Credit Signature Loans
Signature loans in a nutshell are loans that don't require any type of collateral to secure. You usually qualify for this type of loan based on your credit history and income. These loans are usually provided by your bank and since there is no collateral, they carry an interest rate that's often higher than an auto loan.

Bad Credit Private Loans
Private loans are usually provided by a private individual - as opposed to a lending institution or bank. The interest rate on private loans varies wildly due to several important factors. Many times private loans are provided by family members and friends and in that case, the rate charged may be very low. If you get a loan from a private lender, however, you can expect to pay more interest than you would with a signature loan from a bank.

When you have bad credit, private loans are often the only type of bad credit personal loans you can secure.

Bad Credit Auto Loans
Since a car is something that can actually be used as collateral, getting an auto loan when you have bad credit actually isn't that difficult. The bank hedges their risk by placing a lien on the car. This means that if you default on your auto loan, the bank will take the car, sell it, and regain at least some of what they lost.

When you have bad credit, you can expect to pay significantly more interest than you would if you had stellar credit. This, however, is typical for almost every type of personal loan.

Bad Credit Payday Loans
Payday loans come last on the list because they should be avoided at all costs. Payday loans carry the highest interest rates of any type of loan and for this reason you need to avoid them if at all possible. 12 states in the U.S. deem payday loans to be criminal in nature. Canada has laws against payday loans. 100% of the time you will be better off going to a bank or floating on a credit card until your next paycheck.

Update: If you're looking for more information about this topic, here's a great post: Personal Loans With Bad Credit. It talks about a bunch of different types of loans that you can use - even if you are a person that has bad credit. Give it a good read and let me know what you think.