Bad Credit Unsecured Personal Loans – Is My Credit Score Good Enough?
Posted on | August 27, 2009 | No Comments
As defined on Wikipedia, an unsecured loan is:
is a loan that is not backed by collateral. Also known as a signature loan or personal loan.
Unsecured loans are based solely upon the borrower’s credit rating. As a result, they are often much more difficult to get than a secured loan, which also factors in the borrower’s income. An unsecured loan is considered much cheaper and carries less risk to the borrower.[citation needed] However, when an unsecured loan is granted, it does not necessarily have to be based on a credit score. For example, if your friend lends you money without any collateral, meaning something of worth that can be repossessed if the loan isn’t repaid, then your credit score has zero to do with it, but rather the value of your friendship is at stake. Therefore the real meaning of an unsecured loan is that it is not backed by any object of value and is lent to you based on your good name. For financial institutional purposes, they may want to look at your credit score because they are not your friend and it is strictly a business transaction, therefore your good name may be associated with your historical payment history on prior debt, reflecting in your credit score.
With this being the case, it is important to have a decent credit score to not only get an unsecured loan but also to get a decent interest rate. If you are not sure what your credit score is, it is advisable to figure that out sooner rather than later. Many people who do not check their credit scores at least twice a year find that there are several errors on there that could have been resolved had they checked their credit score earlier.
Once you know your credit score you can better determine what your interest rate is going to be. There is a good example of interest rates per credit score located here. By doing a few quick Google searches you should be able to find out what your average interest rate will be. The one good thing about the current state of the economy is that there is great competition out there for companies to provide you with a bad credit unsecured personal loan.
With so much competition, you as a borrower, have the chance to shop around and find the lowest rate. You also have the opportunity to let the competition know what rate you can get from another business. This often creates a better deal for you as they like to throw in a few incentives as well to get you as a first time customer. The main point is to actually get out there and contact some of these companies to see what type of interest rate you can get with your credit score.
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