Getting a Signature Loan with Bad Credit

Securing a signature loan with bad credit is difficult with many lenders. However, there are many lenders who specialize in bad credit or high risk loans that may extend you financing regardless of your credit rating. You should realize you will have high interest rates if you have a bad credit score or a history of loan default. Since a signature loan does not require collateral, you will see higher interest rates than with a secured loan. If you determine a signature loan is still the best option, be proactive in locating the best loan and the best terms.

Step #1: Determine How Much You Need

You should not blindly seek financing in whatever amount you can secure. Instead, first determine how much financing you need in order to make the purchase or pay the bills you are seeking. You will find many lenders who will offer you large sums because they can make money on the interest. It is better to borrow only what you need to keep your payments low and protect yourself from overspending.

Step #2: Determine How Much You Can Afford

Once you know how much you need, decide if you can afford a loan of that size. You do not want to fall into a cycle of loan nonpayment. This means taking a hard look at your income and monthly expenses. Start with your monthly income; now cut it in half. Subtract your rent, mortgage and other fixed loans from this including car loans or student loans. What you have left is the total amount you can afford in a new loan each month.

Step #3: Seek Bad Credit Lenders

You will not likely find a signature loan with bad credit from traditional lenders and banks. You will need to search for a lender who is advertising or who specializes in bad credit loans. Often, these lenders can be found online. Be wary of predatory lending practices. Many bad credit lenders know you are in a vulnerable position and will seek to take advantage of you. Do your research on any potential lender, and do not give out personal information until you feel certain you know who you are dealing with. 

Step #4: Compare Loans

It is always a good idea to show around for multiple loans. Going with the first loan you see will not often allow you to negotiate effectively or determine the options that are right for you. Compare loans based on factors such as interest rate, loan terms, fees and penalties and monthly payments. While interest rate is often the most important factor, deciding on a loan based on interest rate alone will not give you the whole picture. 

Step #5: Negotiate Terms

You do not have to accept the lender's first offer. While the lender is providing you with a service, you are paying the lender to do so. They need you just as much as you need them. Remember this when you go to the negotiating table. Determine the factors that are most important to you, and work to achieve your ideal loan.


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