Even with Bad Credit, Unsecured Loans are Possible
If you are a business owner, you generally have two main choices when it comes to securing a loan: secured loans and unsecured loans. Most business owners will try to get unsecured loans, but in terms of a bad credit loan, unsecured loans are much more difficult to attain. Luckily there are some tricks you can use in order to improve your chances.
Before getting into how you can get an unsecured bad credit loan, you should understand how secured and unsecured loans work. In most cases, a bad credit loan will be a secured loan. Unlike unsecured loans, secured loans are those that are guaranteed by collateral. For instance, if you want to get a secured loan, you will have to put something up against it, such as a home, a vehicle or a piece of heavy equipment. If you have collateral, you are more likely to get a bad credit loan because the risk to the lender is smaller. The lenders know that if you default on the loan, they will still be able to get their money back because they can sell your collateral. Therefore, a bad credit loan is much easier to get if there is collateral on the line. Unsecured loans work differently. In most cases, they are based solely on your credit score. For those with bad credit, unsecured loans may seem untouchable, but that is not always the case.
When you have bad credit, unsecured loans will be more difficult, but not impossible to get. Usually an unsecured bad credit loan will require a higher interest rate. Yet, they may be the best option for you if your business depends on unsecured loans.
Using Business Credit to Secure a Bad Credit Loan
Using business credit instead of personal credit is another reliable method for securing a bad credit loan. In the absence of good business credit, your personal credit is all that can be used. And if your personal credit is poor, it will affect your ability to attain unsecured loans. However, if your business has good credit, then your personal credit is not a strong consideration & the strength of your business credit maybe sufficient for unsecured loans.
But establishing strong business credit takes time. Often, you may have to wait for a year or so before having access to unsecured loans with your good business credit. If time is critical, then consider focusing on improving your personal credit.
A co-signer is another method to attain unsecured loans. A co-signer is someone who has excellent credit themselves and who will be willing to assume your risk. They will be responsible, according to the lender, for paying the money back if you default your unsecured loans. Your co-signer will be taking a huge risk and you should make sure that they understand that before signing on.
Regardless of personal credit, getting a bad credit loan (both secured and unsecured loans) is possible. You may need to be flexible and be willing to pay higher rates in order to get the type of loan you’d prefer.