Bad Credit Personal Signature Loans

Types of Personal Loans

A personal loan is different from a commercial or a business loan since it is availed by the borrower for the sake of financing educational, medical or household expenses. Sometimes, borrowers may avail personal loans for the sake of indulging themselves and embarking on a vacation. Personal loans can be classified into secured loans or unsecured loans.

Secured Personal Loan: A secured personal loan is backed by the signature of the guarantor who agrees to repay the loan in case the borrower defaults. Secured loans may also be collateralized by an asset that is seized by the lending institution in the event of the borrower being unable to fulfill the loan obligations.

Unsecured Personal Loan or Signature Loan: An unsecured personal loan is also known as a signature loan. This loan is advanced by the lender on the basis of the credit history and the income of the borrower since the recovery of the loan is contingent to the borrower's ability and willingness to repay the loan. Credit history is a record of the borrower's repayments in the past. In the absence of any other quantifiable determinant, past behavioral patterns can be considered a reflection of the future. Credit history influences the credit rating assigned to the borrower. Generally, both credit history and credit ratings determine the ease of obtaining a loan and the terms of the loan.

Personal Signature Loans: For People with Bad Credit

As mentioned earlier, for availing personal signature loans, the borrower is expected to have a good credit history in addition to a regular income. This is when bad credit personal signature loans assume a great deal of importance. Bad credit personal signature loans have the following advantages:

No Collateral Required: These bad credit loans are not secured by a collateral and hence are ideal for people who do not have a car or a home to pledge.

No Credit Checks: The credit history and the credit rating is irrelevant since these loans are meant for borrowers whose credit history is bad or far from satisfactory.

Prerequisites for Bad Credit Personal Signature Loans

The following documents are necessary in order to apply for bad credit personal signature loans:

Personal Information: Name, social security number, date of birth, email address and a copy of the driver's license and the social security card have to be provided by the borrower. In some cases, mother's maiden name may also be required.

Proof of Income and Employment: Since bad credit personal signature loans are assigned on the basis of the income of the borrower, proof of income and employment are a must. The name and the contact information of the employer or employers under whom the prospective borrower has been employed during the past 3 years; the gross monthly income and all other sources of income and recent pay stubs, W2s, or income tax returns as proof of income need to be furnished by the borrower in order to avail a bad credit signature loan.

Proof of Address: The borrower needs to provide the current residential address, the mailing address if it's different from the residential address, contact number and submit a copy of the utility bills as proof of address. In case there has been a change of residence within the last 3 years, a person would be expected to provide details of the old address.

Expense: The borrower may also need to provide details regarding the monthly mortgage payment, in case the borrower has a mortgage on the house, or details of rental expenses. In other words, the borrower needs to give a clear picture of the financial commitments that may impede the ability of the borrower to repay the loan.

Personal signature loans for people with bad credit do not have favorable repayment terms. The rate of interest on the loan is quite high and varies between 8 and 20 percent. Although these loans may help the borrowers rebuild their credit history, they may find it impossible, if not difficult, to make timely repayments and may end up further ruining their credit history and subsequently their credit rating.