With bad credit, it’s important to understand that your options are limited, but there are acceptable solutions. There are two basic types of bad credit loans: secured and unsecured.
Unsecured bad credit loans means that borrowers sign a contract and promise to repay their loan according to the terms and conditions. If a borrower defaults on an unsecured loan, the lender may pursue collection of the money owed through a collections agency or through court legal action.
Secured bad credit loans require borrowers use a valuable item—like a car, a home, or jewelry as collateral to “secure” the loan. This means that if a borrower is unable to repay the loan, the lender is legally allowed to seize the collateral and sell it to recoup their losses.
What is the process to get prequalified?
Each lender will have its own qualification process but some common steps are:- Step 1: You complete a short application that includes your name and some basic information about your income and financial situation, amount you want to borrow and perhaps what you plan to use the money for, i.e. debt consolidation, emergency, repairs, etc.
- Step 2: The lender soft pulls your credit which does not impact your credit scores.
- Step 3: If you prequalify for the loan, the lender will give you a preliminary offer that includes the possible interest rate, loan amount, estimated monthly payment and other terms. Keep in mind that this offer isn’t a final loan approval, so the rate and terms could change.
