Our bank accounts are like our rockiest relationships.
They require constant, careful tending from every angle, consume our thoughts and cement themselves as a source of tedious stress and turmoil. Yet, even with gentle handling, the most secure situations can catch sudden fire, demolishing any trace of stability in its past.
When it comes to your personal finance, even the smallest ripple can cause a shatter. From illness to injury, car accident to car repair, life will never cease to require attention. According to Fox Business the average person will file a claim for a collision running about once every 17.9 years, translating to, according to MSN Money, about $1,000 a crash. Likewise, the average household is estimated to accumulate about $3,301 a year in out-of-pocket medical expenses.
However, life moves on—and quickly at that. No matter our sorrow or frustration, life will persist. For many hard-pressed Americans in troubling financial times, one of the only ways to pay off ballooning expenses is through accumulating debt, ruining even the best of credit scores. But, as many individuals with bad credit will tell you, obtaining a traditional loan can be a difficult process.
In times of need, unsecured personal loans can be an excellent option for those with poor credit. Faced with little options, unsecured loans can give individuals with lackluster credit a chance to finance life’s many expenses.
However, these loans should never be taken as freebies. As with any financial resource, unsecured personal loans require alternative commitments and assessments of self before signing the dotted line.
Why You Shouldn’t Be Punished for Unfortunate Circumstance
Even the most financially-savvy of consumers can see their credit scores take a sharp downturn.
According to Experian, of the roughly 220 million Americans with credit files maintained by the three credit bureaus, about one in five have very poor credit. That’s nearly 44 million consumers, many of whom aren’t the ignorant spenders and poverty-dwelling people they might appear. A single misfortune, and consumers can see their savings depleted.
Financial pitfalls happen to the best of us, and it should be no reason to be denied of a substantial-sized loan. Although those with bad credit should always avoid taking out unnecessary loans, sometimes the reasons can’t be avoided. From cribs and car seats for a new bundle of joy, from financing your child’s upcoming wedding, unsecured personal loans allow a unique opportunity to finance larger expenses with so-so-credit.
…But You Shouldn’t Expect a Freebie, Either
Experiencing financial turmoil shouldn’t be the sole reason for being denied a personal loan. However, as with any financial resource, a bit of give and take is often required in the process.
While the rates for unsecured personal loans will typically vary, they will usually be higher for individuals with poor credit.
Before shying away from an unsecured personal loan, it is important to understand why the rates are as high as they are. Lenders need some kind of insurance when it comes to borrowers with bad credit. Without sufficient credit to act as proof of reliability, lenders must resort to other tactics to ensure their money will be repaid.
Although the rates may seem daunting, you can rest easy knowing your personal assets won’t be thrown to the chopping block should their repayments fail.
Consider What Poor Credit Means, and How You Can Escape
As with any major decision you make throughout your lifetime, whether it’s related to your finances or not, careful consideration is key. When it comes to an unsecured personal loan, exhausting alternative options and exploring your history are necessary to ensure you are not only able finance the expense at hand, but are also able to release yourself from a lingering bad credit grasp.
Whether you have decided to take out a loan or are flirting with the options, consider what a poor credit score means for your personal finance. Steve Brobeck, executive director of the Consumer Federation of America, emphasizes the need to cement our credit knowledge. “Most people don’t understand how badly a low credit score can hurt you.”
Although unsecured personal loans can be obtained with a so-so FICO score, they are not a quick-fix for your credit woes. Brobeck goes on to outline the major ways credit score can be boosted.
- Pay all bills on time and in full
- Check your credit file for accuracy at least three times a year
- Don’t open several new accounts up at once
- Don’t max out available credit, and try not to exceed 25% of your credit limit
Ironically, if you are dedicated to your repayment, consider taking out an unsecured personal loan to pay off your debt faster. One of the most common reasons people take out a loan of this nature is to consolidate debt, making payments less scattered and easier to control.
Ask Yourself the Bigger Question
Although it’s easy to say poor credit is the result of poor judgment, it’s only a surface assumption. Credit score plunges can hit just about anyone, whether you’re a lifetime saver or scraping by. One financial pitfall can land you in a sea of debt, but that is no barrier for life’s many expensive ventures.
However, when considering an unsecured personal loan, always make the attempt to form a rounded view. While obtaining the loan is achievable even for those with poor credit, always ask yourself whether the interest rates and repayment schedule are fit for your finances.
Tags: bad credit, unsecured personal loan