Unsecured Personal Loans for Credit-Challenged Borrowers |

Unsecured personal loans are transactions in which funds are advanced to a borrower who has not pledged any tangible property or assets as security for the loan.  Such loans do not, therefore, place the borrower in danger of losing things such as homes or cars in the event they fail to repay the amount due.  Because the lender lacks security for the money they have advanced, this type of loan has traditionally been available primarily to borrowers with outstanding credit histories.  However, particularly in the aftermath of the recent financial meltdown, lenders of all types have recognized the market for unsecured personal loans available to those with imperfect or even seriously damaged credit.

The economic downturn of the past several years has harmed the financial condition and credit ratings of many.  Often, the damage to an individual’s credit occured as a result of circumstances beyond their control, including job losses and unexpected illnesses.  However, even when fortunes take a turn for the worse, the financial necessities of life remain.  Home and auto repairs, education expenses, medical bills and other obligations do not simply disappear in times of economic misfortune.  Indeed, those hardest hit by the economic crisis are the people least likely to have asssets available for use as loan collateral.  In such cases, unsecured personal loans may be the answer.

Bad credit borrowers considering unsecured personal loans must weight the costs and benefits of initiating such transactions.  Despite recent interest rate declines in an overall sense, any unsecured personal loan product is almost certain to have a very high interest rate attached.  Substantial fees and penalties may also accompany this type of transaction, as they are among the only incentives lenders have to justify the risk they incur by making this kind of loan.  However, it is possible to comparison shop for the most advantageous unsecured personal loan terms, and find lenders willing to waive prepayment penalties and who will also report prompt payment history to credit reporting agencies.  The latter loan feature will help the borrower begin climbing the credit score ladder once again.  Anyone with damaged credit who is considering an unsecured personal loan must carefully examine their own circumstances and shop for the best loan product to meet their unique needs.