When you approach a bank for a loan, it wants to know the purpose. In case the purpose is specific like buying a car or a house, or for education, the bank will give a loan easily. However when you need loan for helping finance expenditure that will be incurred during a wedding or when you need money for travel, the loan falls under the category of personal loan.
Who can get a personal loan?
Anyone who needs money can apply for a personal loan. You can even get a personal loan to repay your credit card dues. Since the rate of interest levied on the outstanding amount on your credit card is much higher than the repayment rate of personal loan, you can apply for loan to repay your credit card bill. You can be faced with sudden and unforeseen expenditures (the kind that the bank does not recognize) for which you will need to apply for personal loan. Before giving you the loan, the bank will check for your ability to repay the loan. For this it needs to have a look at your salary statement (in case you are a salaried person) or a statement of account over the past few months to have a look at the condition of your bank account. Once the bank is satisfied, you will have to fill a few forms and the loan will be granted.
What if the loan is not approved?
If you have bad credit, the bank will not approve of the personal loan. A bad credit is an indication of your inability to repay loans and so the bank will not take the risk of giving you the loan. In case you are unable to repay, the bank stands to lose the money which is against its interest. In this situation, you need to find out firms who will give Personal loans for bad credit. There are banks and financial institutions who are willing to give you loan despite your poor credit record. When in a dire situation you need to approach these firms.
How does it work?
You must be wondering why some firms will give you personal loans for bad credit. Of late the market has performed poorly. People have either lost their jobs or are taking a huge cut in their salaries. In this case it is becoming more and more difficult to find people who have a good track record. The banks too need to survive. So they have decided to give loans to even those with poor credit record. However to minimize their risk of losing investment, they charge a heavy rate of interest. This ensures makes the people who want a loan for frivolous reasons, think twice before applying. The other aspect of this is that sometimes people due to loss of job or unforeseen medical emergencies come under debt. This does not necessarily mean that they are bad at handling their finances. A personal loan given to such people with poor credit is like a second chance they have at rectifying their mistakes.