“Money Is a Terrible Master but an Excellent Servant”, a great thought that beholds the value that money possesses. It is known to all that it can be difficult to get a loan if you have bad credit. But NO! Be grateful that there are ways to work upon your poor credit and try to get qualified for a loan.
Let us understand it in a nutshell! It may seem that things won’t work out if you have bad credit, but still, there is hope that you can borrow money in such conditions too. You might also think there isn’t any way to get an ideal loan, maybe by yourself, but you can always get it with a co-signer who has a healthy credit score. Another alternate is you can work on improving your credit score to make yourself eligible for a loan. There are some non-traditional sources too that can help you out!
Following are some important tips for you.
- First, check your credit reports and credit score
- Next is to improve your credit health
- Connect to multiple lenders and find the comparison
- Get the details of the types of loans you can avail
- Find the types of loans to avoid
- What is a Bad Credit?
Bad Credit is generally referred to as the history of a person’s failure to pay bills on time on the credit acquired from any lending company. Also, the chances that the borrower may fail to make timely payments in the future. A low credit score summary in your credit report is an indication of bad credit. FICO (Fair Isaac Corporation) based scoring is the most widely used credit score. They range from 300 to 850, where the higher the score, the lower the debt graph. Under FICO credit score, there are break up of ratings as mentioned below:
Exceptional: 800 and above
Very Good: 740-799
Good: 670-739
Fair: 580-669
Poor: Below 580
So, in case you have been more than 30 days late for the payment of a credit card or loan payment or have multiple missed out credit pays, then your credit score is likely to get a bad hit and the card score is seen under 580. In short, having bad credit can make it hard to get car loans, personal loans, credit cards, mortgage, rental approval, job, etc.
How to get a loan with Bad Credit?
A loan can be availed even in case of bad credit. But, if not in an emergency, the very first step is to improve your credit score so that it eases out your loan requests. Some important points to keep in mind to improve your credit score are:
Pay the credit card bills on time.
Always try to reduce the balance on cards to less than 30% of the credit limit allowed.
Lastly, don’t apply for any new credit.
Where to get a loan with Bad Credit?
There are few lenders out there who market bad credit loans, but it may consume your complete time to shop to find out the interest rates and repayment terms that are affordable for you. Some sources are:
Credit Union
A credit union that is affiliated with your employer or one that is community-based. It may be even willing to look beyond poor credit history and make a judgment based on your character and your promise to repay. Most importantly, a credit union loan is an interest rate ceiling of 18%, which applies to anyone. This same loan from a bank may take you as much as 36% interest.
Borrow from family or friends
This may risk your relationship, but things may seem easier when borrowed, while the repayment terms, time, and interest may heat up the situation. In such a case, you need to formalize with clear documentation and also should be legally recorded. You should create a written contract including loan terms and interest rates, to avoid future conflicts.
Get a Co-signer
The lender will set the loan terms based on the credit score of the person with good credit who acts as a co-signer for you, who will also be equally responsible for the repayment. With timely repayment, your credit score will improve which will help you to obtain loans without a co-signer.
Home loan equity with a bad score
In case you have equity in your home, you can apply for a home equity loan. Here, your home is used as collateral and a home loan can be availed regardless of your credit score. It is important to remember that putting your home equity as collateral may put your property in jeopardy if you don’t repay the debt.
Peer-to-peer lending
This widely known as P2P provides a platform where you can obtain a loan with bad credit directly from another individual or group of individuals instead of any institution. The credit score may still be a matter of concern, but being an individual, the terms can vary.
Which are the best bad credit loan companies for you?
The banks always try to maintain a specific reputation while dealing with the credit score. While also offers a fair platform as a go-to bank considering the market competition.
Credit Unions (a non-profit body) and owner-operated institutions have earned a reputation for being a place for a bad credit loan.
Few online lenders are out there in the market that is good to approach and have expanded the boundaries of lending even to a bad credit score borrower. They are:
Upstart
Prosper
Lending Club
OneMain
Peerform
Avant
Bad Credit Loans
Lending Point
To make your search easier, the list of some best bad credit loan providers with some added information are listed below:
| BANK/ CREDIT UNION | FIXED APR | LOAN TERMS | CREDIT SCORE | MAXIMUM LOAN AMOUNT |
| Lending Club | 8.05%-35.89% | 36-60 Months | 580+ | $40,000 |
| OneMain Financial | 18.00%-35.99% | 24-60 Months | 600+ | $20,000 |
| Avant | 9.95%-35.99% | 24-60 Months | 600+ | $35,000 |
| Peerform | 5.99%-29.99% | 36-60 Months | 600+ | $25,000 |
| LendingPoint | 9.99%-35.99% | 24-60 Months | 585+ | $36,500 |
| First Tech | 6.70%-18.00% | 24-60 Months | 580+ | $50,000 |
| Bad Credit Loans | 5.99%-35.99% | 24-60 Months | Below 580 | $10,000 |
| Upstart | 4.37%-35.99% | 24-60 Months | Not required | $50,000 |
| TD Bank | 6.99%-21.99% | 36-60 Months | Not specified | $50,000 |
| Upgrade | 5.94%-35.97% | 36-60 Months | Not specified | $50,000 |
| Local Banks and Credit Unions | Varies | Varies | Varies | Varies |