Poor Credit Unsecured Loans – The Most Common Variety

I think I can offer people out there with bad credit some hope when it comes to getting poor credit unsecured loans. You might be hunting for the loan you need, worried that you won’t be able to get qualified because you’ve really hurt your credit during the last few years.

The reality is that most poor credit unsecured loans are a type of payday loan, and those don’t require any credit at all. Everything I’ve read and researched lately tells me that these lenders who give unsecured poor credit loans are only looking for a few key criteria:

a. Are you employed full-time? Or at least do you have income in excess of $1,000 to $1,500 per month? I’ve found that these lenders aren’t typically concerned with where the money comes from, whether it be income from employment, unemployment, or even social security income. They just don’t want to lend you the money if you don’t have an obvious means of paying it back.

b. Do you have an open bank account, and does the bank allow direct deposits and automatic withdrawals? This is partly an insurance policy for the lender, and partly for convenience in their processes. Many of these lenders operate on the internet, and they don’t want to have to be dealing with paper checks and snail mail, etc. Once you qualify they want to send you the money straight away. That’s why they’re able to approve you at 3pm one day and have the money in your account the following morning.

They need the direct withdrawal system in place so they can automatically deduct your payments from your account without having to invoice you or send you a statement via snail mail. They will email you a statement after they’ve made the withdrawal, but it’s just standard practice to set up an auto pay system to pay these loans back. That’s really in your best interest as well.

If you can meet these simple qualifications, you’re really not going to have a problem getting an unsecured loan with poor credit. Just be sure to use them responsibly and keep enough money in your account to keep the payments current and get the loan paid back on time with no extensions or renewals. That’s where they really get you.

Unsecured Loans for Poor Credit

Every door in the world of borrowing and finance doesn’t close to you just because you have bad credit. In fact, I’d guess that a high percentage of loans – maybe even 30% to 40% of loans across the board – are given to people that most of the credit world would call ‘credit challenged.’ You have all kinds of loans specifically geared toward bad credit, including home loans car loans, credit cards…you even have unsecured loans for bad credit.

Now, that’s not to say it’s easy to get a loan that doesn’t require any collateral when you have a rock bottom credit score. It’s actually going to be pretty tough. Put yourself in the shoes of the lender, and think about what kind of person you actually want to lend money to.

As a banker, you’re looking for somebody to who’s highly likely to pay the money back. Now, given the fact that you don’t know the people who are walking into your lending institution on a daily basis personally, all you can do is work from the most common source of information on a person’s track record – their credit score. But in the case of unsecured loans with poor credit, you don’t even really get to use that. Folks looking for these kinds of loans look bad on paper.

The whole problem is that the big banks employ huge teams of statisticians who build massive actuarial tables, and the job of those tables is to say “given this person’s credit score, how likely are they to repay this debt?”

For a bad credit borrower like you, those actuarial tables say “he’s not very likely to make his payments on time, if at all.”

So how is the banker going to lend you the money? He has to do something to make sure his overall lending practices stay profitable, so the only way he can give you an unsecured loan for poor credit is to change what those tables say, and he does that through high interest rates and fees.

See, what they do is look at the repayment patterns of all borrowers of approximately your credit standing (aka not so great) and they look at what percentage of the time they bail out on the debt. Once they have a pretty good idea of the default rate, they raise the interest to the point that the interest paid by those who do make their payments more than covers the lost money on those people who flake. Make sense?

So, if you do happen to qualify for a poor credit unsecured loan, you’re going to be offsetting the costs of other people’s unwillingness to pay their debts. It’s not ideal, but I guess you do what you have to.