If you have bad or no credit, it can be difficult to obtain this type of loan. However, personal loans for bad credit are available to those who meet other requirements. Before submitting an application, it is worth taking the time to learn more about these loans. In doing so, you will learn how to qualify for a loan and how to find the best loans.
Understanding What a Bad Credit Score is for Personal Loans
In need of personal loans for bad credit? What constitutes “bad credit”? Consumers with FICO scores of at least 580 are considered to have “fair credit” or better. If you have no credit or your score is less than 580, your credit is considered “bad.” It is more difficult to qualify for personal loans if you have no credit or bad credit. However, it is not impossible. If you do intend to apply for a loan with bad or no credit, it is important to understand that you will likely face:
- Limited loan options
- Poor loan terms, including higher interest rates
- Repayment plans that may not be in your favor
Tips for Getting Personal Loans for Bad Credit
Personal loans for bad credit are available. Read on to learn how to qualify and where you may be able to find them.Apply Directly with Bad Credit Lenders
The most straightforward way to obtain a personal loan with bad credit is to contact lenders directly to apply. However, it is worth learning more about a specific lender’s requirements before you do so. Most lenders will advertise minimum credit scores that must be met to qualify for a loan. Additionally, some lenders may require collateral for a secured loan.If you are denied by a lender, you can try to reason with them in an attempt to change their mind about your denial. This will likely only work with smaller financial institutions. For example, if you call customer service or Chase or Capital One, that agent will likely not have a solution for you.
If you are able to speak with someone who makes decisions on denials, you can try providing an explanation of your poor credit score or showing that your income is high enough to easily make timely payments. You may also qualify for a lower amount.
Get a Cosigner for Your Personal Loan
When you apply for a personal loan, you can apply with a cosigner to improve your approval rates and loan terms. This can be a great way to get the loan you need while working on your credit score. Anyone can cosign for a loan. However, your cosigner will likely need a higher score than you and must meet income-based qualifications.Ask Family or Friends for a Loan
Consider asking friends and family for personal loans, especially if you only need a small amount. You won’t have to meet any qualifications, and you may not even have to pay any interest. You should also consider a secured personal loan. If you need a personal loan for bad credit, you may have better luck with a secured personal loan. These types of loans require you to put up collateral. Should you default on the loan, you will lose that collateral.How to Apply for Personal Loans
You can apply for personal loans in several ways. Applying for a loan requires you to submit an application directly with a lender.Most lenders allow you to apply for personal loans online. However, some lenders may require you to visit a location in person or complete an application by mail or phone. Depending on how close you are to qualifying for a loan, you may also be required to provide additional documentation. For example, if a lender cannot verify your income, you may need to provide proof of that income.
How to Find the Best Personal Loans
The best personal loans will require you to have a higher credit score and meet other eligibility requirements.If you are able to work on your credit score before applying for a loan, you will be more likely to be approved and you will obtain far better loan terms. While bad credit loans are available, they simply cannot compare to the benefits that a better loan will provide you with.