If you are on shaky ground financially and you are looking to obtain a loan, chances are that the only lenders that are willing to take a chance on you will require collateral.  This scenario is called a secured personal loan.  They will want assurances that you are going to pay on time. If you default on your loan, the lender can confiscate your collateral and sell it.  The proceeds from the sale of the collateral would go toward the defaulted loan. For many people, their only asset that can really be used as collateral is their home.  If you have shaky credit, that secured personal loan can be a scary proposition. 

If you are in desperate straits however and have shaky credit, there are lenders that will take a chance on you with a secured personal loan.  Before, the lenders could care less why you have shaky credit. They would just flat out tell you no. These days, they will at least inquire about why you have a less than stellar credit history.  After all, a credit report just has a bunch of numbers on a page.  It does not tell you the “whys” and that can be important.  For example, you could have gone through a divorce and your ex-spouse managed to rack up some financial damage before the ink was dry on the divorce papers.  Through no fault of yours, your own credit becomes affected.

If you want to find a secured personal loan and you have shaky credit, there are a few tips to consider during your quest.  First of all, if you do manage to qualify for a loan, ask the lender if the loan will be reported to the three major credit agencies in the United States.  You will want your secured personal loan reported so that your good payment history will be reflected on your credit report.  By paying in a timely matter, your credit score and credit history can only improve. 

Secondly, thoroughly examine your financial status.  Dig out your pay stubs and bills. Log everything onto a budget worksheet so that you can determine exactly how much you can pay for a secured personal loan per month. Do not just log in all your credit card and living expenses.  Try and anticipate other out of pocket costs like car repairs, doctor visits and pharmacy prescriptions.  By having your financial information together before meeting with a bank officer, you will make a good first impression as someone meticulous and diligent about their financial status.  In fact, even providing proof of financial or debt counseling might help you too.

A third thought about applying for a secured personal loan with shaky credit is that you can expect to pay several points higher than normal for your interest rate. This is to be expected.  However, not all lenders are scrupulous.  Some will try to rip you off with higher than normal rates and hidden fees, even for those with shaky credit.  Be sure to shop around for a reasonable interest rate for your secured personal loan.  It can be a hard job, but you can and will eventually find a lender who is fair to your plight.

This may seem obvious, but obtain a copy of your credit history and credit score from each of the three major credit bureaus.  They make numerous mistakes on people’s credit histories all the time. In addition, credit card companies often send in erroneous information. Perhaps your own credit report is not as bad as you fear.  Go through each line item and study everything.  Be sure to highlight entries that could be wrong.  You will have to dispute, in writing, each and every discrepancy.  It may take a few months, but it is possible to clean up your credit enough in order to qualify for a better interest rate for a loan.

Keep in mind that a secured personal loan can be risky business.  Unless you have totally reformed your spending habits, you could stand the risk of digging a deeper hole of debt.  Tread lightly and research heavily for a lender willing to give you a secured personal loan at a reasonable rate.  It is possible; you just have to work for it.

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