A personal loan is money you can borrow for various purposes. You may use a personal loan to fund home renovations, consolidate debt, or plan a wedding. You can get a personal loan from credit unions, banks, or online lenders. Usually, you should repay the money you borrow over time with interest. Some lenders may also charge some fees for personal loans. You will learn about the best personal loans for bad credit shortly.
If you have bad credit, you usually have poor credit scores. That means you may be having scores as low as 300. Credit scores usually determine your creditworthiness. The more scores you have, the more likely you will receive loans and credit cards of higher limits. Financial companies must inquire about your scores from the credit bureaus to be sure whether you can repay your loan as per the expectations.
Bad credit personal loans are necessary to rebuild your credit. Suppose you default on loans or make late payments. In that case, financial companies report you to the credit bureaus, the bodies responsible for credit score calculation. That leads to a score drop, which makes it hard to get credit from banks and similar institutions. However, you can build your credit over time if you get a personal loan for poor credit.
Best Ways to Get a Loan With Bad Credit
You may get a personal loan if you have bad credit from lenders who do not require good credit. We have financial companies whose aim is to lend to people who have the potential to return a loan irrespective of their scores. However, such loans can be expensive since they attract high-interest rates.
You can also get a personal loan with poor credit if your lender considers other factors, such as income and debts. Suppose you have suitable employment and a good salary. In that case, a lender may decide to give you a loan and have your employer deduct monthly loan repayments. Again, if you have fewer or no debts, a lender may give you a personal loan if you provide a legitimate way to repay the debt.
Another popular way to get a loan with poor credit is using collateral. That can be a house, car, motorbike, land, or other valuable property. If you cannot repay your loan, your creditor will come for the collateral to repay your debt.
Lastly, you can get a loan with bad credit through a co-signer. A co-signer is a person with a good credit rating that stands with you so that you get credit. The person is liable for your repayments and can repay the debt on your behalf. You can get your parents, sibling, or friend to be your co-signer.
Types of loans for bad credit
There are various loans for bad credit that you can get from various financial companies. They include the following.
1. Secured loans
These loans require you to deposit a particular amount of money in your account to get them. Usually, such loans are for building credit.
2. Unsecured loans
Some financial companies offer unsecured loans for bad credit. However, they check if you have a reliable source of income.
3. Joint personal loans
A Joint personal loan allows you to get a loan with the help of a loved one. The other person acts as a co-signer.
4. Payday loans
These types require you to return within a short period. You may have to return within days or a few weeks. The loan types attract high interest.
5. Cash advances
These are loans from your credit card companies so you can withdraw cash from your credit card account.
Tips for Comparing Personal Loans for Bad Credit
Generally, there are various tips you can consider to get a bad credit personal loan. These include the following.
- Check your credit scores to know which lenders can give you a loan with your scores.
- Seek lenders that check more than just your credit. These can check your financial status.
- Prequalify for loans online. Most online lenders can give you a personal loan if you have bad credit.
- Compare loan offers. After checking several offers, you can check the cheapest.
- Apply. Once you get the best loan, you can then submit your application.
The Best Personal Loans for Bad Credit In 2022
There are various bad credit loans you can get from various financial institutions. They include the following.
1. Best for people without credit history: Upstart
You can get the loan if you have a thin credit history. The minimum credit score requirement for the loan is 600. The loan attracts an APR of 4.37% – 35.99%, and you can get amounts ranging from $1,000 to $50,000.
2. Best for flexible terms: OneMain Financial
The loan is best for bad credit-secured loans. It does not have a specified credit score, and its APR can range between 18.00% – 35.99%. You can borrow amounts between $1,500 – $20,000.
3. Best for quick funding: Avant
Avant gives you a personal loan with quick funding whereby you can get loan amounts between $2,000 – $35,000. The interest rates range between 9.95% – 35.99%. The loan requires a minimum score of 600.
4. Best for fast approval: LendingPoint
If you need a bad credit loan with term flexibility, you can consider LendingPoint. It requires a score of at least 620. Again, the loan has an APR of between 7.99% – 35.99%. You can get loans of between $2,000 to $36,500.
Do personal loans build credit
Personal loans can help you to build your credit. If you repay your loans on time and as per the agreements, then you stand a chance to grow your scores. Personal loans for bad credit are usually best for building credit. The better you repay your debt, the more the credit bureaus receive positive information about your repayments.
Pros & Cons of personal loans for bad credit
Personal loans have advantages and disadvantages. These can be categorized into pros and cons.
Pros
- One lump sum
- Fast funding
- You may not need collateral
- Lower interest rates
- Extended loan terms
- Easy to manage
- Build scores
Cons
- Higher interest rates
- More eligibility requirements
- High fees and penalties
- Extra monthly payments may be needed
- Increase in debt load
Bottom line
A personal loan is money you borrow to use for various purposes. You may use a personal loan to fund home renovations, consolidate debt, or plan a wedding. You can get a personal loan from credit unions, banks, or online lenders. One can get a personal loan for bad credit to build their scores. Types of bad credit loans include secured loans, unsecured loans, payday loans, joint personal loans, and cash advances.
