Lots of banks provide unsecured personal loans. Wells Fargo does. Bank of America does. Chase does. The list goes on and on and on. If you have awesome credit you can walk into almost any bank and take one out. Some banks call these loans signature loans but the name doesn’t matter. The point is that you can easily take out an unsecured loan if you have a job and great credit.

The problem, however, lies in the fact that there are millions of people in our country that don’t have great credit. Many people have bad credit and for these people, the process of borrowing money is a lot more complicated. If you have bad credit, banks are going to turn you down because they believe that you have a history of not paying your bills on time.

My Story With Bad Credit

When I first started college, I didn’t understand credit. I also didn’t have parents who cared about helping me to learn. They actually don’t know a dang thing about credit – about money for that matter. I took the first two credit card offers I ever got and open up two credit accounts. I proceeded to ruin my credit by making my payments late (way late) and going over my credit limits. I lost my job and had no way to make money so I decided (stupidly) to let those cards go. The banks shut them down and I had a terrible credit history.

Two years later I had become really responsible with money. I had a good job and paid my bills on time. I had learned about how credit works and had realized how many mistakes I had made. In those two years I hadn’t paid a single bill late. I decided that I better check my credit report and discovered, to my horror, that my score was around 475. I’m pretty sure you can’t buy a snickers bar on credit with a 475 credit score.

Can you see the conundrum? I was a truly responsible person with a terrible credit score. Where do people like that get a loan when they need it?

The short answer is that you simply don’t have any awesome options. It didn’t matter that I had two years of a clean credit history – banks wouldn’t even consider giving me unsecured personal loans with bad credit.

The Options I Had

At that point, I discovered that really I only had two options:

1. Find a cosigner (I honestly didn’t have anyone to help me out with that).
2. Use cash advance loans.

Neither of these options is that great. Cash advance loans have a ton of interest and I didn’t have a person in the world who could help me as a cosigner.

I took out a cash advance loan or two but realized that I was only making my situation worse. I decided to create a real savings account with a few thousand dollars in it. That account became untouchable – almost like it wasn’t my own money. I never again needed this type of loan.

However, that doesn’t mean that I didn’t use these loans before that, when I needed to. If you find yourself in that situation, just be careful. Investigate the lenders you’re checking out. Check more than one and compare fees and interest rates.