Bad credit is a burden that can really hamper you financial freedom. You may have the same income as someone else, but they have a better house, better car, better clothes, better electronics and can take better vacations because they have good credit. This allows them to finance the better things in life and not have to put their plans on hold until they save up the money in 6-12 months. Plus, they get good interest rates, which make it cost less for them to borrow this money.

The best loans for people with bad credit are secured loans. This is for two important reasons:

1. Secured loans are easier to get. This is because you are giving the lender collateral to hold on to, just in case you don’t pay your loan. If you do pay your loan, then you get your collateral back.

2. Secured loans allow you to improve your credit score and graduate to better loan terms. This positive credit history is essential to getting unsecured credit cards and loans from other lenders.

So just what is a secured loan?

With a secured loan you will be given money from the lender and, in exchange, you will give the lender some collateral to hold on to. This can be valuable, your home, car, or even cash that is equal to the value of the loan.

You make regular monthly payments on the loan and are even subject to interest fees and late payment penalties. Your interest rate may be higher than most, especially if the loan is specific to those with bad credit. This higher rate makes it possible for the lender to take on ‘riskier’ borrowers, like you.

During this time, the loan company will report on your performance to the three major credit bureaus—Equifax, Trans Union and Experian. Assuming you keep your end of the deal and make the minimum monthly payments on time, your credit score will rise and help you secure future loans.

Once the loan is completely paid off, you will receive your collateral back. You can then try to get an unsecured loan or a secured loan with a better rate from another company (or from the same company if you prefer, which may be better since you have a history with them.)

In the event that you default on your loan, the company will keep your collateral and report your negative performance to the credit bureaus. This would be unfortunate, especially if you took out this loan with the aim of improving your score.

All in all, if you have bad credit, a secured loan is one of the best loans for you to apply for and may be the only type of loan that you have a chance of approval with. Plus, it will keep you from having to get money from subprime lenders who will charge you even bigger fees and stiff you with high annual dues and other feed in the process.

One of the most tragic effects and, simultaneously, causes of the current financial crisis is the poor credit scores of Americans. In the first place this is a cause, in that many Americans could not get a loan with a reputable company at a fair rate because of their poor credit. This, because of the unaffordable rates, because of the enormous down payments, made it impossible for these people to continue to pay, which helped to destroy the banks. At the same time, as the financial crisis continues, more and more Americans are losing their jobs and having an ever harder time of paying for bills. As a result, their credit scores are falling once more. Therefore, the credit scores are also a results of the financial crisis. If we wish to repair the damaged economy, repairing our credit scores is very important. What follows are some recommendations about how to repair your credit and, therefore, be far more likely to be able to qualify for an affordable loan.

Anybody can qualify for a loan. That is a fact. However, to qualify for an affordable one, a person must have the trust of their creditor. A person's credit score essentially shows that trust in a numerical value. Therefore, to raise the creditors' trust, and your credit score, you must do things that show that you can be a responsible and trustworthy debtor. The most important way to repair your credit is to reduce your debt to income ratio. This is the largest portion of your credit score, meaning that you must pay off as much of your debt as possible. If you have excessive credit card debt, an excellent way to do this is to pay the minimum on all of your bills except for one. With that you should pay as much as you can afford, which can pay off your debt far faster than you might expect.

Next, you have to establish a foundation of paying off your debts on time. If you just came out of bankruptcy and can't qualify for any credit at all, a good way to establish this is to get a secured credit card. This offers no risk for the lender, meaning that almost anybody can qualify. And if you pay off the bill in full every month, which is a good practice anyway, you can quickly show a future lender that you are responsible enough, by raising your credit score. If you have a mortgage, make sure that you don't miss any payments on that either.

And, finally, limit the number of lines of credit that you have open. This has a small but noticeable effect on your credit score. Every additional line of credit "pings" your credit score, reducing it by a small amount. More importantly, this can be one reason why you missed your payments before. A large number of lines of credit can be extremely inefficient, meaning that you simply forget to pay some of those bills. And every little bit can help.

Sure you can get a loan with bad credit. A search on any search engine will reveal many sites that offer bad credit or unsecured loans. These loans are generally known as payday loans. You can borrow money with bad credit or no credit if you have a verifable income, a checking account with direct deposit and agree to Automated Clearing House (ACH) payment direct from your checking account each payday.

Are you prepared for the cost of such a loan?

A payday loan is just that. You agree to pay the loan back at your next pay day. Sounds good so far. Now the catch. The interest rate is a killer. Borrow $500 and you may have to payback $650 on the next payday. Yes, that's 500 plus $150 interest based on an interest rate of 782.14% for 14 days. That's $30 per $100 borrowed. Which isn't so bad if you can pay it back in one lump sum payment.

What if you can't?

Most companies will give you up to 5 paydays to payback the loan. At an interest rate that is recalculated on the new balance. So you may or may not choose to pay the full amount until the last possible payday. Over the life of the loan you would have paid $750 in interest on a principal of $500.

Most companies allow partial payments on the principal. Using this example if you made a $100 principal payment plus the interest payment you would pay $450 in interest over the life of the loan. Almost the original loan amount.

One advantage of the payday loan is the fast approvals and access to the money. Since the funds are direct deposits into your checking account, you will have access to your monay the next day. All contact is via fax and telephone. Many companies are entirely online. No embarrassing in person appointments. You maintain your account online.

Another advantage, no credit applications to complete. You don't have to tell anyone why you need the money. You can use the money for any purposes. Pay the gas and electric bill. Did you get a good deal on a last minute vacation deal and need the money in 48 hours? Emergency home or auto repair. It doesn't matter why.

Another advantage of a payday loan is that your loan amount will increase the more often you borrow. Your first loan could be for $300. Once that loan is paid, you may be able to borrow $400 or $500 on your next request.

So do your research and look for the best deal to fit your needs

Poor credit scores are the number one reason that most lenders will not lend you money for the essectial things in life such as a car, home, or any other loan for a personal nature. Some reasons for the poor credit scores are items that you may not know about, or have inconveniently slipped under the radar of your normal bull paying scope. When applying for a personal loan, one of the first things to do is to check your credit score, and see if there are any items on the report that may potentially be negative. If such items are found, you have options including using one of the many credit repairing agencies advertising on a local and national basis.

The riskiness that is taken by banks on a personal loan is very high due to the fact that most of the time a personal loan has no collateral attached to it. In order to start the process you will need to fill out a credit application with the institution that you wish to get the loan for. Then the loan officer will determine your credit worthiness even in the face of your bad credit score..

With personal loans, more often than not, your credit score will not be a factor. With the many options available for the “payday” loan, you can use your checking account as a type of collateral having the monthly payments directly withdrawn from your checking account. This type of loan is typically for smaller amounts with the limit being around fifteen hundred dollars. The lender may encourage you to take a smaller amount so that your monthly payments will be lower, and the interest rate lower.

The officer at the institution will also have to determine whether you have the means to pay back the loan in question. When applying for the loan, the loan officer will take a long look at your employment history, taking into account if you have been at your current job for a long period of time. This evidence of longevity will increase your chances for getting the loan, and may even seal the deal. Excessive job changes over a short period of time will not look good, and should be avoided. The good news is that with personal loans, there is more of a informal closing process which does not include any formal proceedings, which will ensure less paperwork, and a more comfortable setting.

Another good way to get a personal loan with less than perfect credit is to go through a organization that you are affiliated with. This method of procuring a loan is generally a little more difficult, but the rewards can be plentiful with lower interest rates, and possibly more money available to you. Once a organization is determined, the process is much like getting a loan from a bank in the fact that a application process will be needed, and the same factors will be examined. One of the other positives to this method of personal loan procuration is that the organization may overlook some of the things on your credit report that are reporting negatively, and may give you more money in the long run.

The main thing that you have to remember when starting the process is to only borrow the money that you need in the situation you are in. One of the greatest mistakes made in the lending game is borrowing too much money, and not being able to repay the amount in the monthly payments. Focus on the amount necessary, and no matter what, make the monthly payments as described. This will not only increase you lending power with the institution selected by showing a good history, but also give you a chance at improving your credit, and increasing your promising financial future.