How To Avoid High Risk Personal Loan

High Risk Personal Loan is a type of bank loan that specifically being designed for the people who has been considered as high risk. People who has been considered as a high risk people by the bank is those people who unlikely be able to pay back the loan, have an extremely bad credit rating or even those who has declared bankruptcy.

It is a short term loan that needed to be repaid within a couple of years and the amount is small, ranging around $500 to $2,000. Most of the time this loan does not necessary needs any collateral to put against the loan or any credit checks.

The consequences for the loan applicant that apply for this loan that does not need any collateral and credit check is that the financial institutions will charge a lot higher interest rate and if you miss the repayment, the late penalty will be a lot higher as well. However the consequences for the financial institutions are that the loan applicant cannot pay the loan back, there is nothing much that can be done.

Therefore before you apply for any loans, you need to prepare yourselves and how do you do that. First check your credit rating report. Approximately 25% of credit rating report is not accurate; they have some errors that might disadvantage you. Further more, if you know your credit rating, you can determine what sort of loan that you are qualifies for, so you might avoid apply for high risk personal loans.

Another way that you can avoid applies for a high risk personal loan is by taking classes. When you are a student you can apply for a federal student loan. Some advantages of the Student loan are they are offer lower interest rate or if you are eligible the government can pay for the interest. Other advantage is the flexibility and the longer term of the repayment options that available.

Other way to avoid applying for the high risk personal loan is to borrow money against your retirement fund (401k or Superannuation). The process to apply for the loan is fairly straightforward, and you can use the money for anything. If you borrow money against your retirement fund, it will not appear on your credit report, which is an advantage and the repayment can be straightaway deducted from your salary and that is another advantage.

If you can not avoid taking out a high risk personal loans, you better make sure that you can make the repayment on time. Because taking out that loan is just like drawing a double sided sword. It can make your credit rating worsen if you are not paying the repayment on time, on the other hand it also can repair your credit rating if you never miss your repayment. When your credit rating is better you can apply for a better term and conditions and even lower interest rate for your future loans.

One good tip for people, who want to apply for high risk personal loan, is to talk to a lot of financial institution, in other words to shop around to find the best term and condition, lower interest rate. If you already talk to a lot of bank than you just increasing your bargaining power, therefore you can turn one financial institution against one another, just make sure you do not overdo it.