The New York Times reported that the Bank of America wrote off 33.7 billion in bad loans in 2009. This was more than double the amount of the 16.2 billion written off in 2008. It’s no surprise that in the 4th quarter 2009, Bank of America stopped offering personal loans.
Bad Credit Loans
They’re not the only bank that wrote off bad loans. The loans the banks were hit hardest by were made to consumers with bad credit. Rather than the possibility of writing off more debt in 2010, banks aren’t approving as many bad credit loans. This means if you need a personal loan and your credit isn’t great, you may not get the loan. In fact, it may make more sense to repair your credit prior to applying for a personal loan.
Your three digit FICO (credit) score is viewed as possibly the most important factor regarding whether or not a bank will underwrite a loan for you. That’s because it gives lenders an instant idea of how well you’ve managed your money over the past several years.
If you made your payments late or missed them entirely, your score will plummet. If you have a bankruptcy or foreclosure in your financial past, your score will really drop. At some point you’ll have to apply for a bad credit loan.
If you are able to get one (in the face of the information above), you’ll pay higher interest rates and higher origination fees.
If your score is below 620 you’re considered a credit risk. If you’re score is 720 or higher, you will generally qualify for the best loan products and the most favorable interest rates.
Many banks have ramped up their personal loan operations in 2010. So loans may be available. However, your personal loan options will be limited if you have poor credit.