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Unsecured Credit Lines - Unsecured Credit Lines with Bad Credit or Bankruptcy

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If you have bad credit, just completed bankruptcy proceedings, or both, you will find that your choices for receiving credit are severely limited. Most types of personal loans will be closed off and lines of credit will be difficult to obtain. House loans and auto loans can be equally difficult to get approved. When you begin looking for credit, websites and advertisements will make it seem like credit is so easy to get that your credit report and past bankruptcies are no problem, but this is not true at all.

When you begin to dig further, you will notice that the print advertisements and websites with claims of easy credit are all for secured credit. This means that you cannot get approval without putting up collateral. The collateral requested is usually in the form of a house or other real estate. Any offers for credit lines must be secured with cash and your credit line never extends beyond the amount of cash you give the lender to hold.

Options for Unsecured credit lines are not impossible to find if you have bankruptcies or bad credit. There are still a few lenders who will deal with you, but there are drawbacks. Do not expect unsecured credit lines from banks. You will be forced to deal with only a few lenders who will provide unsecured credit lines in the form of low-limit credit cards. Most of these cards will only be available with the minimum limit of $300. In some situations where your credit is not as bad as you thought it was, the limit may be extended to $500.

Besides the low limit from these unsecured lines of credit there are other drawbacks. Instead of securing the card with a cash deposit, these companies protect their unsecured lines of credit with high fees. You may be charged one or more of the following fees:

  • Application fee – This is a one-time fee that must be paid before your application will ever be looked at. This fee can be as high as $100, but if you are not approved, the lender is forced to return this fee.
  • One-time processing fee – The processing fee is assessed after your application has been approved. It is a one-time fee and is usually automatically deducted from your credit limit.
  • Annual fee – On top of an application fee and a one-time processing fee, the lender may also charge you an annual fee of $100 or more. This annual fee may be deducted in full from your credit limit upon approval or it may be deducted in a series of monthly payments.
  • Monthly processing fee – Monthly fees may also be assessed for your unsecured credit limit. This fee is much like that charged by banks for a checking account. It is usually between $5 and $15.
  • Miscellaneous fees – Several other miscellaneous fees may also be charged in exchange for the approval of unsecured credit lines. These fees can include online account fees, transaction fees, and statement fees.

After all the fees have been assessed, your $300 line of unsecured credit may be reduced to only $50 of available credit. The cost of these unsecured lines of credit doesn’t end here. Your card will also carry a very high interest rate that could range from 21 percent all the way up to 51 percent. To make matters worse, because your fees are being charged directly to your card, you will have to pay them within the 20 to 30 day grace period or you will have to also pay interest on the fees.

If you have bad credit and bankruptcies, it is usually in your best interest to avoid unsecured lines of credit. If you are looking to establish a new and better credit history, low-limit cards secured by cash are the best route. These cards will not have all the fees of the bad credit unsecured cards. Many people who accept these unsecured cards end up making their credit worse than it already was because they are unable to keep up with the fees and interest charges.

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