How to Get a Bad-Credit Personal Loan

A bad-credit personal loan is a relatively new offering from financial institutions that recognize that a less-than-perfect credit history doesn't necessarily mean a borrower is likely to default on loan repayment. To secure a bad-credit personal loan, you'll have to have a clearly defined purpose for the money, which will in turn affect the terms of the loan and its repayment.

Difficulty:

Moderate

Instructions

Things You'll Need

• Credit application
• Supporting documentation (credit report, proof of earnings, notarized list of assets and liabilities)

Get a Bad-Credit Personal Loan

1. Find lenders that offer bad-credit personal loans. First, check with your regular bank. If that doesn't work, head online to see what's available through the many non-traditional financial institutions that have become key players in the personal finance marketplace.

2. Identify the reason you're seeking a loan. If you need it for a major purchase, such as a home or a car, remember that you might be better off rebuilding your credit first so you can get a regular loan with terms that are more advantageous. Many people also get bad-credit personal loans for short-term financing for things like home improvements, weddings, honeymoons or to pay down debt.

3. Compare the terms of the various loans you're considering very carefully. Look at more than just interest rates and repayment terms. Check carefully for hidden fees, high closing costs and other loopholes designed to increase the amount you'll end up paying back to the lender.

4. Meet in person with the lender if you're applying through a bank, or complete your application if you're trying to get a loan through an online or wholesale financial institution. Make sure you know ahead of time what kind of supporting documentation you'll need to show, and bring it with you. Generally, lenders want evidence that you have assets to use as collateral and a steady, secure income stream to ensure you can cover your loan payments.

5. Present your supporting documentation to the lender, complete all application materials in full, and do your best to give the impression that you're trying to turn the corner on your bad credit history.

6. Review all the loan documents to ensure the terms contained therein are the same as the terms you agreed to. Sign off on the loan if everything looks as it should.

Tips & Warnings

• Use the opportunity to improve your credit rating. Pay back the bad-credit personal loan promptly, don't miss any payments and watch your credit score increase.

• The fees, closing costs and interest rates on a bad-credit personal loan are usually much higher than standard bank loans.