Where Can I Find Personal Loans for Bad Credit?
A personal loan is a form of unsecured debt, which means that you don’t need collateral to apply for it. Because this type of loan involves more risk for lenders than a secured loan that requires collateral, a borrower can expect to pay a higher interest rate on an unsecured personal loan. But a major advantage to personal loans is that you can use them for anything, including debt consolidation, business expenses or even a vehicle purchase.
If your credit isn’t fair or good, you can likely still get a loan — and you might have a few different options. Here are the pros and cons of this financial tool and details on where and how you can get a loan with bad credit.
Where to Get Personal Loans for Bad Credit
The good news is that you have options for personal loans if you have bad credit. If your credit rating is low, you might be wondering, “How can I get a loan with bad credit?” Here’s the answer: Do your homework and shop around to find the best rate available. Look into credit unions, brick-and-mortar banks and online lenders for unsecured, bad credit loans. Because many lenders typically prefer to offer loans to people with good credit, you might have better luck with an online personal loan from a peer-to-peer lender like Lending Club or Prosper.
You’ll need a credit score of at least 640 to get a loan from Prosper and 660 to get one from Lending Club. These online lenders offer personal loans for people with bad credit and make it easy to apply with online applications. The loans are similar to traditional bank loans, but you are borrowing from individual investors in a P2P lending situation.
Credit unions typically offer more flexible loan terms and lower interest rates than traditional banks. The maximum interest rate a federal credit union can charge is generally 18 percent, which means credit unions often offer the best personal loans for bad credit. This interest rate might even be lower than what you’d end up paying at an online bank if you’re applying for personal loans with bad credit.
Some other financial institutions provide unsecured personal loans for bad credit borrowers, too. Many lenders will give you a great deal if you have a co-signer with excellent credit — but remember, your co-signer is responsible for the loan if you default.
You might also come across payday loans if you’re searching for bad credit loans. Payday loans typically feature very short terms — from 30 days to a few months — and very high interest rates. Taking out a payday loan is probably not going to be a good choice for you unless you’re certain you can pay it off within the short time frame.
Find Out: 7 Best Types of Loans for People With Bad Credit
Bad Credit Personal Loan Lenders
It is possible to get a loan with bad credit. Here are three options to consider in your search for the right personal loan for your situation; each of these lenders specializes in bad credit loans:
- OneMain: This lender doesn’t have a minimum credit score requirement for a personal loan, but your application might require collateral. You can get your loan approved the same day, often within 10 minutes. Depending on where you live, the interest rate ranges from 9.99% to 36% APR, loan amounts are between $1,500 and $25,000, and loan terms are from two to five years. Origination and late fees also depend on the state in which you live.
- LendingPoint: You need a minimum credit score of 600 to obtain a bad credit personal loan from LendingPoint. Available loan amounts are between $3,500 and $20,000, and terms range from 24 to 48 months. You can get funded the day after you apply. Expect to pay up to a 5 percent origination fee on the loan amount. Interest rates range from 15.49% to 34.99% APR.
- Avant: Typical Avant customers have a credit score between 600 and 700 — loans are available from $1,000 to $35,000 with terms of two to five years. The lender offers next-day funding for qualified applicants, and you’ll have to pay an origination fee of 1.75 percent to 3.75 percent of the loan amount. Interest rates range from 9.95% to 36% APR.
See: Every Personal Loan Option for Your Credit Score
Pros and Cons of Personal Loans for Bad Credit
Bad credit personal loans offer advantages and disadvantages. To help you better decide if this type of loan is right for your situation, consider the following pros and cons.
Pros of Bad Credit Personal Loans
Understanding the advantages of a personal loan when you have bad credit can help you make an informed decision about your financial future. Here are three ways that you can benefit from personal loans for bad credit:
- Manage unexpected expenses: A personal loan can be helpful if you find yourself in an emergency financial situation. When you have bad credit and no savings, a personal loan might be your only solution for dealing with the unexpected.
- Improve your credit: If you qualify for a personal loan with lower interest rates than other debts you currently carry, consider using the loan to pay off your high-interest debt and improve your credit by making timely payments on the loan. Using a well-planned debt consolidation strategy can help you rebuild your credit so you don’t have to apply for bad credit personal loans in the future.
- Qualify for lower interest rates than credit cards: If you can’t count on credit cards that you’ve already maxed out when you need some extra cash, a personal loan might be an option for you. Look for a lender that offers bad credit loans with monthly payments that fit your budget and a lower interest rate than credit cards carry.
Cons of Personal Loans for People With Poor Credit
Although there are benefits to taking out a personal loan when you have bad credit, there are some downsides of increasing your debt load, too. Make sure you’re aware of the drawbacks involved in taking out bad credit loans:
- High interest rates: One of the reasons you qualify for a bad credit personal loan is that you agree to borrow money at a higher-than-average interest rate. Lending money to an individual with bad credit comes with risk, so the lender can demand higher interest rates to mitigate that risk, which will end up costing you money.
- Risk of damaging credit: If you don’t make your personal loan payments on time or default on the loan altogether, your actions will have a negative impact on your credit score. Because you had bad credit before you got the loan, you’ll risk damaging your credit even more.
- You might need a co-signer: Some lenders will give you a personal loan with bad credit only if you have a co-signer. If you don’t have one, you’ll have to explore other options with different lenders.
Learn: 8 Ways to Raise Your Credit Score in 2017
How to Consolidate Debt With a Personal Loan
One of the benefits of getting a personal loan is that you can use it for any purpose — including consolidating debt. If you have high-interest credit cards or loans that you won’t be paying off in the near future, getting a personal loan with a lower interest rate and paying off those debts in full can help you consolidate your debt and save money.
Debt consolidation loans can be a simple and effective way to rebalance your budget by potentially reducing your monthly payments. Using such a loan could enable you to get a better handle on your financial situation.
How a Personal Loan Can Save You Money
When you’re making more than the minimum monthly payments on credit cards or other loans that have high interest rates, paying off the balances with a personal loan is an option. Instead of making payments to several cards with different interest rates, you’ll be making one monthly payment toward a loan with a fixed interest rate, which will save you money in the long run.
But if you consolidate your debts, it’s crucial that you don’t accrue more debts in addition to the consolidation loan. When you consolidate debt, the idea is to make more room in your budget for other expenses — or savings account contributions.
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