Personal loans are risky by definition because they are unsecured. Lenders have always been cautious when extending personal loans. Usually lenders look at the borrower's credit history to determine how much they re willing to lend and the interest rate they will charge to lend it. For many years, that left individuals with bad credit without a lifeline for emergencies.

Everyone has emergencies, even good people with bad credit. Recently, credit unions and some banks and savings and loans have stepped up to provide short-term loans to the members and depositors with bad credit. These institutions not only offer the best interest rates available to people with bad credit but also offer additional services such as financial counseling, and debt consolidation.

Payday loans are another choice for emergency funds for people with bad credit. The advantages of a payday loan are that it is immediate and that as long as the borrower has a job, no one is turned away. Payday lenders often limit the amount they lend to $500. The downsides to payday loans are that they are very short-term and the interest rates are inordinately high. Typically, payday lenders charge $15 to $30 per each $100 they lend. So if the borrower takes a loan of $100 today, on payday the borrower must repay $115 to $130.

Because payday loans are very short-term, they present a risk to the borrower. Most borrowers turn to payday loans because they are in an emergency situation. Perhaps the car needs a repair, or their child needs to see a doctor, or maybe they need money to attend to a sick parent. Payday loans must be repaid usually within two weeks, if the borrower can't repay the loan; they pay the fees, and roll the loan over. So now the $100 loan will cost them $30 to $60 per month.

Once a borrower begins the cycle of rolling over their loans, there is often no way out. The payday loan that was meant to solve an emergent problem has become the problem itself. If for instance, a person borrowed $100 and wrote a check for $130 to pay the principle and interest, only to find out that come payday, they didn't have the funds to repay the loan. The borrower then pays the $30, and rolls the loan over. If the borrower rolls the loan over three times, he/she has paid $90 in interest in six weeks.

Personal loans are available to individuals with bad credit. Smart consumers will shop around and find the personal loan with the longest term and lowest interest rate to meet their emergency needs.