The good news is that there are lenders willing to generate personal loans to those with bad credit. Such lenders look beyond your credit score. While it's true that your FICO score affects the interest rate you qualify for, it does not necessarily stop you from getting a loan. You want to find a reputable lender who is transparent about fees and interest rates. It's key to avoid predatory lenders and scammers looking to take advantage of those with bad credit.
Personal Loans With Bad Credit
It's not uncommon with bad credit loans for rates to hit 20% or more. Borrowers should ask, can I afford the payments at this rate? Lenders also might cap you at a lower loan amount to minimize their risk, or you might be required to put up collateral to get a loan.
One attractive option is the secured loan or credit card. Even consumers with bankruptcies on their record may be able to get a secured loan. They must pledge assets to the lender as security against the loan. Making on-time payments on a secured card or loan helps to re-establish your credit.
It's worth taking the time to research which lenders make loans to those with bad credit. Many lenders do not make loans to consumers with a FICO score below a specific number. Others will look at income, expenses and current debt load as well as the credit score. Avant will accept a medium credit score and charge no origination fees. PersonalLoans.com does not require excellent credit, and offers a simple application process. One Main offers both secured and unsecured loans, but the interest rates charged are a bit high.
Applying for a Bad Credit Loan
The loan may be unsecured, with the lender having no claim against your assets, or secured, meaning you put up your auto, home or other asset as security. With a secured loan, you'll likely see a better interest rate, but if you don't keep your payments up your home could be at risk.
When you look at the term of your loan, remember that the longer you take to pay off the loan, the more you will pay in interest over the life of the loan. One strategy is to pay off a small loan quickly to rebuild your credit, allowing you to take a future loan on better terms.
Also, with a personal loan for bad credit, interest rated may be tiered according to the amount you borrow. A larger loan amount might mean a lower interest rate. You should not borrow more than you need, but do ask at what amounts you'll get a break in the interest rate.
Bad Credit Tips
Get cozy with your credit report. Take advantage of your right to an annual free credit report from the major credit bureaus. Know your credit score, and check that report for any inaccuracies or fraud. You can file a dispute if there are inaccuracies and clean up your report.
Before applying, ask yourself if you really need the loan, and whether you have a plan to pay it back. Yes? Then the search is on for an honest, transparent lender.