New Loans and Loan Consolidation: Resource Center

You should correct the problem that caused you to be rejected before you apply for another loan. Cleaning up your credit report, paying down debt, boosting your income, and/or cutting your other expenses before you apply again can help, depending on your situation.

No. Your job and your paycheck serve as your collateral.

You can apply for a loan if you have maintained a good credit history for a couple years since you filed for bankruptcy. Lenders will be more likely to lend you money again if they see that you have managed your money responsibly. After 7-10 years, bankruptcies can be removed from a credit report, making it far easier to qualify for loans.  The best thing that you can do, if you have filed for bankruptcy in the past, is to re-establish new lines of credit and prove that you can make the monthly payments and manage your new debts.  Start small, with store cards or gas cards, and work your way up to larger loans.

A debt consolidation loan is a loan you get to pay off multiple loans. Debt consolidation loans are useful when you have varying amounts of debt on varying items (car loan, credit cards, medical bills, etc.). The idea is to get a loan at a fixed and low interest rate to pay off other debts. It typically reduces the total expense of debt.

A payday loan is a short-term loan that's extended until your next payday. Repayment of the loan is made through an authorized automatic withdrawal set up at the time of the loan. Terms and interest rates on payday loans can be extremely high, so payday loans should only be used in emergencies and should be paid off in one term (don't roll them over or take out multiple payday loans, or you'll have real financial headaches!)

Debt consolidation loans are used to tackle a number of things. If you have multiple credit cards with varying amounts of debt, a debt consolidation loan can help reduce their high interest rates by rolling over the amount onto a new, low interest loan. For homeowners, wanting to better manage their debt. These loans may reduce the interest-rate related to unsecured debt by placing their home as a form of guaranty securing the debt.

A short term loan (a.k.a. payday/cash advance loans) is one common type of bad credit loan that is available to you. This type of loan requires no credit check or co-signer.  You may need to provide collateral in the form of a paycheck stub and employment verification to qualify for a short term loan and a checking account for the funds to be transferred to, and payments deducted from.

If you have bad credit you can also work to re-establish credit and work yourself up from small loans, like gas cards or store cards, to larger loans once you have proven that you can manage payments and debt loads.  If you have a co-signer or significant equity in an asset (more than 20% of the value of a home, for example) you may be able to qualify for a mortgage loan.

Most payday loans are due the pay period after you make the loan -- typically no less than 7 days and no more than 18 days. You can normally pay off payday loans early.

When you have multiple debts piling up on credit cards, car loans, and other areas, it might be time to get a debt consolidation loan. However, you do not want to jump right into a debt consolidation loan. Ideally you want to wait when interest rates are low. That way you can get a fixed rate loan that will save you money in the end.

Amortization  is making installment payments on a loan, where a portion of the payment goes to the principal balance and a portion goes to the interest. Most amortized loans have the same monthly payment throughout the term of the loan.

APR is the cost of credit to the borrower, expressed as a yearly rate. The APR includes interest, fees, and other borrower costs. The APR is higher than the interest rate, because the fees and other costs  are included. When shopping for a loan, you should make your comparisons based on APR, instead of the just the interest rate, because it will help you determine your actual annual cost.

A line of credit gives you the right to draw on funds up to a credit limit. For a business, this type of loan helps to finance short-term working capital needs, such as inventory purchases or to pay operating expenses. A line of credit is appropriate for businesses with seasonal operating expenses or variable working capital demands. A line of credit is not appropriate for large long-term investments such as buying property, new equipment, or fixed assets.

A loan used to payoff multiple accounts of personal debt. A debt consolidation loan rolls pre-existing debt into one loan with a single monthly payment.  Debt consolidation loans often are taken out to combine several higher interest debts into one lower interest loan.

The current value of a home minus what is owed on the property. You may be able to borrow against your equity, using it as collateral for a loan.

The lowest interest rate that banks give to their best customers for short-term loans. Most of the time they are calculated as the Federal Funds Rate plus 3 percent. The prime rate is usually the basis for mortgages, cars, credit cards, and most other loans. You will see interests rates described as "prime plus x%." Private student loans more often than not use this standard, but federally funded student loans do not.

A secured loan uses your property as collateral. If you default, the lender can reclaim your property to pay off your loan. Although the interest rate on a secured loan is lower, your property is at risk if you cannot make the payments.

Student loans are usually guaranteed by federally chartered and backed organizations, Sallie Mae being the largest lender. Sallie Mae is also a large private student loan originator. Most student loans are used to pay for educational expenses. Federal Stafford Loans can be consolidated once.

A title loan uses the title to a boat, car, or other property to secure the loan. The lender uses the property as collateral in case of default. The lender can then sell the property in order to recoup the money from the loan.

An unsecured loan is also called a personal loan or signature loan. It requires no collateral. Unsecured loans usually have higher interest rates than secured loans.