Personal Loans for Bad Credit
In the United States, your credit score is the most important part of your application for finance. Without a good credit score, it can sometimes be extremely hard to get loans or other forms of credit. If you are able to get one, you typically have to pay much higher interest rates than you would if you had a good credit score. This is because lenders are worried about your ability to pay back your loan – they want to be compensated for the risk that they’re taking.
But the simple reality is that not everyone has perfect credit. In fact, a large portion of the country has bad credit. If you’re someone who has bad credit, but you need to get finance for something in your life, you shouldn’t accept defeat. There are a few different ways that you can get personal loans without having a stellar credit score. This may sound too good to be true, but it isn’t. Plenty of lenders are willing to give the right candidates a chance regardless of their credit history.
This guide will provide you with all the tools you need to understand how to get a personal loan if you have bad credit. It will explore all the different factors you should consider, as well as the methods you can use to get a personal loan for bad credit. In addition, it will provide you with advice on how to prepare yourself for the application process – there’s more you can do than you think.
What is a Personal Loan?
A personal loan tends to be one of the most popular forms of finance offered by traditional lenders. A personal loan is often referred to as a term loan. This means that it is a loan that is paid back over a set period of time (term) at either a fixed or variable interest rate. It is one of the easiest forms of finance to understand – it is about as straight forwards as a loan can get.
Getting a personal loan is way less complicated than other forms of credit. This is because you are provided with a set payment plan at the beginning of the loan – you’re fully aware of your payment commitments from the onset. This makes it much easier to pay back than other forms of credit – you know exactly how long it will take and whether or not you can realistically afford it.
What Are Personal Loans Used For?
Personal loans can be used for almost anything. The most common form of personal loan tends to be an auto-loan. Most people receive a 5-year term loan to purchase their cars. This is also secured against the car, so this is technically a secured personal loan.
Other uses for personal loans include purchasing phones or laptops, or simply getting some additional cash to finance an extension or job around the house. If people know exactly how much cash they will need for something, personal loans are the perfect way to plan out your payments. In addition, they have much lower interest rates than credit cards so they tend to be more popular for specific purchases.
If you want more information about personal loans in general, and what they can do for you or your family, check out the homepage on this website – it has all the information you need to become an expert on personal loans.
What Are My Chances?
So, you need a personal loan with bad credit? You may be wondering where to get a personal loan with bad credit, or how to get a personal loan with bad credit. The truth is that there are a range of different options that you can consider – one is sure to work out.
Very bad credit personal loans are obviously going to be harder to get than if you have a moderately bad credit score. The chances really depend on a lot of factors. Your credit score is the most important indicator of your ability to get a loan, but your income and the other assets you have will also be a huge factor. If you’ve recently experienced a large income increase, you will be much more likely to be eligible for the personal loan for small business.
The lender you go to will also play a major role in how easy it is for you to get a loan. Online lenders tend to be much easier for those who have a bad credit score. If you’re doubting your ability to get one through a traditional lender, definitely head online. This will be explored in more detail further on in this guide.
Who Provides Personal Loans for Bad Credit?
If you want to get a personal loan for bad credit, one of the most important questions you’re going to have to ask yourself is: Where? Personal loans are given out by a number of different lenders, but having a bad score will mean that you have to be a bit pickier. There are three different places that you can get a personal loan for bad credit from, they’re outline in more detail below.
Traditional lenders are your normal consumer banks. Traditional brick-and-mortar banks are the most popular places to get personal loans. The only problem is that these places have much higher eligibility requirements than other lenders. Because traditional lenders typically offer much lower interest rates, they also try and curate a group of responsible borrowers. If you have an extremely low score, you might not be eligible for traditional lenders. Regardless, you can talk to your bank about what kind of personal loans they offer.
The only downside is that traditional consumer banks often have long application processes – they require a lot of paper work and can sometimes take weeks to approve you for your loan (or reject you).
Traditional lenders have finally been given some competition in recent years. As technology advances, so does our ability to access finance through smaller, online lenders. These lenders have become increasingly popular with people who don’t want the hassle of going to a bank and applying for a loan. Online lenders typically have a much easier application process – they allow you to upload and submit all your documents directly through their website. This can be incredibly stress free in comparison to other types of borrowing.
Online personal loans for bad credit are also much easier to get, many lenders don’t require as high of credit scores as traditional lenders. This is a great advantage if you’re looking for bad credit personal loans online – it is one of the easiest ways to get approved. This being said, interest rates do tend to be higher, and there are some predatory companies in the market. You should research online lenders extensively before handing over valuable personal information – you don’t want to fall into a hoax. Fortunately, consumer watchdog groups such as the Better Business Bureau (BBB) keep tabs on these things.
With online lenders, you need to be especially aware of the terms of the loan you are taking. Many online lenders have deviated away from the framework put in place by traditional lenders. You shouldn’t assume anything, make sure that you are certain you know exactly what you’re responsible for paying for long before you sign any agreements.
The last of the three locations that you can attain a personal loan from is via a private lender. Private lenders are simply an individual or an investor that is willing to lend you a loan at a certain interest rate. This may sound dodgy, but it’s not. There are tons of websites that facilitate private lending. Some private lenders don’t require a credit check at all, which can be perfect for someone with a really low score.
This is one way to ensure you’re in contact with direct lenders for bad credit personal loans. The downside is that private lenders tend to have the highest interest rates out of the three lending types mentioned in this article. They often have to have extremely high rates to ensure that they get a return on the risk they are taking. If you don’t think you can afford an extremely high interest rate, then this might not be right for you. Keep in mind that while private lenders are not consumer banks, they do still have to abide by general usury laws – there are legal measures in place to protect you.
Secured Personal Loans for Bad Credit
Secured personal loans for bad credit are typically the easiest forms of personal loans to get. They also come with much lower interest rates than other forms of finance. This isn’t to say that they’re the best option though, as they have their own associated risks. Firstly, if you attain a secured personal loan, you have to put up collateral to secure the loan. This means that you have to have an asset that you own to sign over to the bank in case you default on your loan. If you don’t have anything that is worth as much as the loan you’re receiving, you won’t have any collateral and you won’t be offered a secured loan.
In addition, if you do have collateral you can sign over, you’re risking that you may lose it if you default on your debt. This means that if you default on your personal loan you might end up losing your home or your car. You shouldn’t put your family at risk – make sure that if you do secure the loan, you’re 100% positive of your ability to pay it back.
Unsecured Bad Credit Personal Loans
This is most likely the type of loan you’re looking for – it has the least risk on your part as you will not have to offer up any personal assets to receive the funding. The problem is that these loans are much harder to get, especially with bad credit. Lenders don’t want to lend risk-free money to someone with a bad credit score, this means that they will potentially default on the loan. In addition, because people with bad credit score already have bad scores, the risk of having another default on their record will most likely not be a deterrent.
The other problem with unsecured loans is that they typically have higher interest rates than secured loans. This is again because of the risk involved for the lender. This being said, an unsecured bad credit personal loan is still far better than a secured one because it doesn’t put you at risk of losing valuable assets in your life. For this reason, we suggest you opt for unsecured personal loans if you have the choice – even if the interest rate is a bit higher.
Cosigning for a Personal Loan with Bad Credit
Another option you have is to get a cosigner for your loan. A cosigner is someone who attaches their name to the loan and becomes liable for it should you end up defaulting on it. Many parents do this for their children when they are trying to get a car loan or a mortgage. It can help increase your chances of getting it and reduce the overall chances of having an extremely high interest rate. Perhaps ask a family member or a close friend if they’d be able to cosign the loan for you.
You need to be certain you will be able to pay back the loan if you do this, otherwise you might put a close relative or friend in a bad position. When they cosign the loan, they are responsible for it. If it defaults, they will end up with a bad item on their credit score. In addition, if you make late payments, they will also be penalized on their credit score.
Improve Your Score Before You Apply
While there may be lenders that are willing to take you on if you have an extremely low credit score, you should still do everything in your power to improve your score as much as possible. This will drastically increase your chance of having your loan application accepted. On top of this, you’ll also find that the interest rates that you get offered will be much lower than if you applied with an inferior score. In addition, if you do apply with a bad score and you get rejected, this rejection will go on your credit score and lower it further. For these reasons, it’s extremely important to be as prepared as possible for the application process. We’ve outline three ways you can improve your score before you apply for a personal loan with bad credit.
Check Your Report
This may sound irrelevant, but it’s actually extremely important to check your credit report before you apply for any lending. This is because many credit reports have major mistakes on them. You may have checked your score in the past, but it’s really important to check each item on the report to make sure that you don’t have any mistakes. Having an incorrect item on your credit report can be devastating for your score. Each of the three major credit reporting bodies are required by law to give you a copy of your credit report once a year – contact one for them for your free copy to give it a check.
If you do find that your credit report has a mistake on it. Submit documentation to the reporting body that proves that the item is not yours. If they are refusing to remove it, contact a credit repair company to help you get the items removed. Credit repair agencies can be extremely useful when it comes to improving your credit. They can get mistakes and inquiries removed fairly easily – they can definitely be worth the investment.
Pay Down Your Current Debt
People think that their credit reports are almost stationary, this truly isn’t the case. In fact, a large portion of your current credit score can change month-to-month. 30% of your credit score is made up of the amount of debt you are currently using. As in, what percentage of your credit card limit is currently in use. This changes every month as credit card companies report their data after every statement.
If you want to drastically improve your credit score, pay down your current credit cards before the statement period ends. The less credit utilization you have on your cards, the better your score will be. We can’t stress this advice enough – some people will see an over 100-point improvement when they pay down their credit card debt.
Wait a Little
This may seem like redundant advice, but its’ really important – especially if you’re not entirely sure how credit reports work. By law, most items have to be removed from your credit report within 7-10 years of filing. This means that eventually your credit score will be completely refreshed. Now while this is a long time, and many people may not be able to wait years to get their personal loan for bad credit, it doesn’t mean that you can’t improve your score slightly by waiting a few weeks or months. Check your report to see if you have any previous items that are reaching maturity. If they don’t come off after they’ve expired, call the credit reporting company straight away and have them remove it.
As you can see, there are three simple strategies that anyone can use to help put an immediate boost into their credit score. The importance of doing so cannot be stressed enough.
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Final Thoughts and Suggestions
Now that you’ve read all the information in this guide, you should have a much better idea of how personal loans work and what they can do for you. Personal loans are one of the best forms of finance available to the everyday consumer. They let you take advantage of opportunities or purchase items that enhance your life. In addition, they have much lower interest rates when compared to credit cards or other forms of finance.
But if you have bad credit, attaining any form of finance can turn into a total nightmare – personal loans included. That’s why you should do as much as you can to find a lender that is okay with your credit score – the advent of online lending has meant there are much more competitors in the market place.
For the first time in a long time, it seems as though lenders are competing for borrowers, not the other way around. This is a great lending environment to be in if you have a bad credit score. There aren’t many other times that you’ll find such an abundance of capital online through both online and private lenders.
If you do decide to move forward with getting a personal loan, you should determine if you’re going to get a secured, unsecured, or cosigned loan. Remember how important it is to be responsible if you end up getting a secured or cosigned loan – failure to be responsible can result in you damaging yourself or others.
No matter who you decide to work with, make sure that you understand the reputation they have in the industry. There are a lot predatory lenders who try and take advantage of people who are desperate to get capital – don’t become the next victim of a scam. As mentioned previously, use consumer watchdog groups to ensure that you are working with a legitimate company. Make sure that any company you work with has a large amount of reviews and that they extend back multiple years. Even if you opt to work with a traditional lender, you should do research on them before you sign any agreements. Even some of the largest traditional banks in the country have horrible reputations when it comes to consumer satisfaction.
Lastly, don’t over-apply for loans. Every time you apply for a loan and get rejected, it will further damage your score. In addition, if you apply for a bunch of loans at once you will find that lenders will be worried about your behavior. Applying for finance in quick succession indicates that you are desperate for cash – this is a huge red flag for many lenders.