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Ryan Martis
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« on: July 11, 2009, 06:25:58 AM »

High Risk Personal Loans - Know When to Avoid High Risk Personal Loans

A high risk personal loan is a loan given to someone who lenders consider to be particularly unlikely to pay back the loan -- somebody with extremely poor credit or a person who has just declared bankruptcy or has a county court judgment against them, for example. A high risk personal loan is a type of short term loan, usually in a small amount, typically ranging from $500 to $1500, although the amount can be higher. Like some other types of loan, it doesn't require a credit check, nor does the applicant need to have any collateral.

A high risk unsecured personal loan means that the amount isn't secured by property or any other goods. Basically, if you don't repay the money, there isn't a great deal that the lender can do about it, as you have no collateral that the lender can take from you towards repayment. It's one of the reasons why the interest rates on this type of leading are so much higher than on other types of credit; the penalties for missed or late repayments are usually high as well.

One way to avoid high risk personal borrowing is to apply for a federal-student-loan, if you qualify. These types of loans usually have lower interest rates than other types; the interest may be paid by the government while you are at school. They also offer flexible repayment options including a longer repayment term. The two most popular federal student-loans -- the Perkins and the Stafford -- are based on the applicant's need and are not based on a credit score.

Another potential source of funds is; if you need money in a hurry is to borrow money from your 401k if you have one. All 401k plans by law, must allow you to borrow money from them; the application process is fairly straightforward and there is no limitation on what the money can be used for. A 401k loans won't appear on your credit report and paying it back is easy -- and payments can be conveniently deducted from a paycheck in the same way as the 401k contributions were taken out.

If you do take out a high risk unsecured personal loan and are able to repay it on time, just doing this will actually boost your credit score. The next time you need to borrow money you may be able to enjoy a slightly better interest rate and terms, for that reason. And before you apply for a high risk personal credit, it's also worth taking the time to check your credit report to make sure that everything on there is accurate -- your credit may not be as bad as you think. Around 25% of credit reports have serious errors on them.

If you are in the unfortunate position of having very poor credit and need money in a hurry, you may be forced to take out a guaranteed high risk unsecured personal loan -- in fact, it may well be the only option open to you. It's important to shop around and compare interest rates, fees and restrictions -- make sure you get the best offer you can.

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