The use of personal loans lost a lot of appeal when the tax code eliminated certain deductions for the interest costs on consumer items. Since the interest costs were still deductible with home equity loans and their rates were usually lower, the use of personal loans fell.

Personal loans are still available, but because of their normally unsecured nature, they're harder to get if you have bad credit. When no collateral is used to secure a loan, other factors gain more importance. For instance, if you have an established relationship with a small bank, this may go a long way in getting you a loan. Especially in seeking bad credit unsecured personal loans, the word "personal" should remind you that these loans are based on your character and not just your financial statement.

Of course, besides your character, lenders want to check certain financial items. They'll see how long you've lived at your current address and held your present job. They'll want to know how you've handled your debts in the past and present, particularly the unsecured ones. And it's important that your debt-to-income ratio is low. Lenders try to determine both if you can repay the loan and you will want to repay the loan.

By their very nature bad credit unsecured personal loans are more expensive to get because they present higher risk to the lender. A home loan has security for the lender, but a personal loan doesn't. So count on higher interest rates and fees.

Personal loans come in two types, either closed-end loans or a revolving line of credit. Bad credit unsecured personal loans are usually the closed-end loan type. The interest rate is usually fixed and has a set number of payments. And the better your credit, the longer the loan length can be. But while your monthly payments are higher with a shorter term loan, your total cost is less.