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Making The Decision About Unsecured Bad Credit Loans

By Areelitaha Joahlanski

Not one of us asked for the difficult financial times that we are left to deal with. Be that as it may, we are in a recession in the United States. More and more people have had to avail themselves of unsecured bad credit loans in order to temporarily keep food on the table. The unemployment rate continues to rise, along with the decline in available jobs.

Taking these facts into consideration, an unsecured loan is the simplest and easiest way to procure much needed funds. As the name implies, these loans are unsecured releasing the applicant of the necessity of providing collateral. Others considered for these loans would be those having poor credit or never having had credit before.

Regardless of whether a loan is secured or unsecured, a borrower must feel obligated to repay the loan. Payments made on time can restore a poor credit history. It can also build a credit history for the newcomer to world of finance. Do not ever be so foolish as to think you can default on a loan and walk away unscathed. Lenders will protect their interests under all circumstances. You will repay the loan with penalties and added interest fees.

Compared to a secured loan, you can expect to pay a higher interest rate on the borrowed monies. This is the case even if your credit history is good. Do not be afraid to shop around among the available lenders. Seek out the reputable lender with the lowest interest rate. Comparison shop as we do for so many things. A loan should be no different. If you have a history of credit worthiness, negotiating your interest rate may pay off.

Be extremely careful in your dealings with lender’s that advertise unbelievable terms. They may offer very low interest rates but added penalties could end up costing you more in the long run. These lenders may offer very short grace periods with high costs added if you miss the due date. Other lenders will go so far as to demand payment in full of the loan.

Unsecured loans do have some advantages. The application process is quick and easy and these loans are available to just about anyone. There is very little paperwork involved, but the paperwork you do sign is a legal and binding document. The interest rate may be a bit higher but it is a fixed rate. This assures that your payment will always remain the same.

Along with the pros, an unsecured loan also has its drawbacks. One is the aforementioned higher interest rate. Another disadvantage is the lower allowed amounts that you can borrow. Loan companies are out to cover their interests, so a smaller loan means smaller payments. This greatly reduces your chance of defaulting on the loan. There will also be a much shorter loan period, again to insure repayment to the lender.

The interest that is charged on your loan are the funds that keep the lender profitable. The lender can then pay his employees, and overhead, and continue to lend more money. On approval of your application, do not be surprised if the lender uses the term ‘prepayment penalty.’ This is a legitimate practice and even some large banks use the practice. In securing a loan with a lender, you agree to pay a set amount of money for a set number of months. This allows the lender to calculate the amount of money he will make over the duration of the loan. When you choose to pay off your loan earlier than anticipated, the lender loses money. To offset the loss, the lender will charge a prepayment penalty to recover some of that loss. If the amount is reasonable, you should not be afraid of it, but definitely aware of it.

Now that we have examined some of the pros and cons of unsecured loans, it should be easier to establish if this is the route you wish to take in securing your loan. Do not be hasty in your decision. If there is any loss to be had, be assured it will not be the lender that gives you the loan.

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Article Citation
MLA Style Citation:
Joahlanski, Areelitaha "Making The Decision About Unsecured Bad Credit Loans." Making The Decision About Unsecured Bad Credit Loans. 26 Aug. 2010. 7 Sep 2015 <>.

APA Style Citation:
Joahlanski, A (2010, August 26). Making The Decision About Unsecured Bad Credit Loans. Retrieved September 7, 2015, from

Chicago Style Citation:
Joahlanski, Areelitaha "Making The Decision About Unsecured Bad Credit Loans"

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