How to Get a Personal Loan with Bad Credit: A Complete Guide
Getting a personal loan when you have bad credit can seem like an impossible task. But don’t worry we got you covered – there are still options available to you! Here, we’ll take a look at some key factors for securing low-credit personal loans.
There are many people with poor credit out there. And as a result, they believe it will be impossible for them to obtain a personal loan. However, the reality is that people with bad credit can still obtain these loans. Simply knowing where to search and what to do will be enough.
If you want to get a personal loan even though you have low credit, there are a few factors that you should consider. First, make an effort to stay away from payday loans.
These loans frequently have excessive interest rates and can be incredibly challenging to repay. If you absolutely must get a payday loan, be sure you have the funds to repay it as quickly as you can. Also, many people settle for the first offer they get and fall victim to predatory lending, so always choose a reputable lender no matter the loan type you want to take.
Another thing to keep an open mind for is getting a cosigner for your loan. A cosigner is someone who agrees to sign the loan with you and be responsible for the payments if you can’t make them. This can be a family member or friend. Having a cosigner with a good credit history will increase your chances of getting approved for a loan and even secure you much better rates.
Finding deals will be challenging with bad credit, but it surely isn’t an impossible task so shop around for the best deal!
How Bad Credit Impacts a Personal Loan Application
Bad credit can be a major obstacle on your journey to securing a personal loan. Lenders use credit scores to determine how creditworthy you as a candidate are. If you have an excellent score, the lender will see your application as a low-risk investment and be willing to offer you good loan terms. If your score is poor, the lender will think you are less likely to repay the loan. As a result, borrowers with bad credit may have difficulty qualifying for a personal loan or may be offered less favorable terms, such as a really high-interest rate.
But even with poor credit, it is still possible to secure a personal loan. In addition to some advice and tactics that help increase your chances of approval, there are some lenders who focus on providing personal loans for bad credit borrowers.
What Is the Credit Score Requirement for a Personal Loan?
You now might be asking what the minimum credit score is if you’re trying to apply for a personal loan with bad credit. Unfortunately, there is no one-size-fits-all answer to this question. Each lender can set its own credit score requirements, and they can vary quite a bit. With that being said, as a general rule, most lenders will require a credit score of at least 550 in order to qualify for this loan.
Where to Get a Bad Credit Loan?
So, let’s take a look at where you can get a personal loan with bad credit. There are actually few places available to you that offer these loans.
The best place to start is a local bank or credit union. They may be more willing to work with you if you have a good relationship with them. If that’s not the case for you, there are also many online lenders that specialize in bad credit personal loans. Make sure you do your research before choosing one, and we suggest you go with some of the more reputable lenders as there are many scams out there.
5 Tips on How to Get a Personal Loan with Bad Credit
Now that you know you can get a personal loan with bad credit, we still have some tips that we want to share with you.
Overall, even though it’s possible, this whole process might not be easy. These are just some things you can do to increase your chances of getting a loan.
1. Evaluate your credit score and credit records
First, take a look at your credit score. How bad actually is it? Carefully evaluate your credit score and credit history. In case there are any errors on your credit report, consult with your bank so they can remove them. Yes, there are lenders who specialize in giving personal loans to individuals with bad credit, but even they might not be willing to work with you if they see there are no chances for you to repay the loan. The next thing to think about is getting a co-signer. If you have somebody who has a better credit score and is willing to sign this loan contract with you, think about this option as well. Co-signer will ensure you get a much better loan term and interest rate.
2. Look for bad credit lenders and compare
Try finding as many lenders as you can that specialize in loans for people with bad credit. Once you gather many offers, be sure to carefully compare them. In general, yes, your interest rate will be higher than if you had a good credit score, but many terms and conditions vary between lenders. Don’t forget to read the fine print and ask them if you have any doubts or just don’t understand everything clearly. This is important with any loan agreement but especially with this one, as there are many predatory lenders who will offer you a seemingly good deal just so they can later trap you in the cycle of debt.
3. Go through the prequalification process
One of the things you can do to increase your chances of getting approved is to go through the prequalification process.
When you prequalify for a personal loan, you provide some basic information about yourself and your finances. The lender then does a soft credit check, which doesn’t hurt your credit score. This gives them an idea of how likely you are to repay the loan, but also gives you the idea of how likely you are to be approved for a loan and how much they can offer you.
You can go through this process with many lenders before you decide on one. This will give you important information about the loan lenders are willing to offer you so you can just choose the options you like best and apply for them. This will also save you some time, as you are not going through the whole application process with each and every lender you find.
It’s also a good idea to read reviews from other customers to help you choose.
4. Check your ability to repay the loan
Be realistic with how big of a loan you want to take out, and whether you can afford the monthly installments or not. Lenders will be reluctant to give a loan if they think you’re not going to be able to repay it. They’ll want to see evidence that you have the ability to repay the loan, such as good employment history and income.
If you can provide the lender with proof that you will be able to repay the loan you may be able to secure a good offer. However, don’t expect them to lower your interest rate as they will still see this as a high-risk investment.
5. Consider a co-signer
As we already discussed, if your credit is really poor and you are getting no offers or just really bad ones, consider a co-signer. This can be either a friend or family member that is willing to sign a loan contract with you and is fine with being responsible for the loan if you default on it.
Being a co-signer is a big responsibility, so don’t pressure anyone into doing it. However, having one will significantly help in the whole application and approval process. It will also secure you much better interest rates.
If you cannot find one, consider putting down collateral. Putting your house or car as collateral in case you are unable to pay off the loan will give the lender peace of mind because this is something they can repossess if they lose the money you borrowed.
Final Thoughts
If you have bad credit and are in need of a personal loan, it is possible to get one. There are not only a number of lenders who specialize in this, but you can also consider a co-signer or putting collateral. In this article, we provided you with information on the best personal loans for bad credit and how to secure them.
Nonetheless, it is important to remember that these loans will likely come with a higher interest rate than a loan for someone with good credit. Whatever you choose in the end, be sure to shop around and compare rates before taking out a loan, and be cautious not to become the victim of predatory lending. Think about hiring a financial advisor as well, if you need any help in the whole process.
