There are many reasons why you may need a loan. Maybe you just need a boost to make it to your next paycheck, or perhaps your car’s transmission suddenly gave out. No matter the reason, a quick infusion of cash can make all the difference. Unfortunately, if you have bad credit, getting a personal loan can be difficult.
The good news is, if you have bad credit, personal loans are often still an option. You simply have to know where to go and how to apply. The process won’t be as simple as it would be if you have good credit, but even those with credit scores under 600 have options to get a personal loan.
At Your Own Funding, we help people with all credit scores secure personal loans, no matter the reason they need it. Fill out our handy online form to figure out how much money you can get, and how much in total the loan will cost.
First, Consider Your Other Options
No matter where you go to get a loan, if you have bad credit, it will likely be expensive. Bad credit means you are a risk to lend money to. In order to ensure they get their money back, banks and other financial institutions may require a down payment or fee, and will very likely charge high-interest rates to those with bad credit. And if you miss a payment on your loan, your credit score will likely drop further.
So if you have bad credit, your absolute best option is to avoid seeking personal loans in the first place. Consider all of your other options. Do you have items around the house you can sell or even pawn for a quick cash infusion? Maybe a family member can float you some money. There are a variety of options besides personal loans that can help you cover whatever immediate costs you have.
But if these options aren’t available to you, a personal loan can help. Here’s how to get a personal loan with bad credit.
1. Figure Out Where You Stand
Before you start applying for personal loans, figure out how you look to potential lenders. The most important factor is your credit score. Your credit score tells lenders if you generally pay back loans on time, and how great of a risk you are. The best way to check your credit score is by visiting Experian and/or FICO, which provide the most commonly used credit scores by lenders. You can also use free tools like Credit Karma to check your score without affecting it.
If you have time to wait, work on improving your credit score. Check your credit score reports to see if there are any errors, like missed payments that you actually made. These errors can be disputed to be removed from your report. You can also try paying down your debts, though that may not be an option at the moment. Experian also has a new tool that lets you boost your credit score with on-time utility payments.
2. Reach Out to Potential Lenders
Before you file for personal loans online, visit your bank or credit union. Your financial institution has a better understanding of your financial standing and may be more willing to offer you a loan than other lenders. Credit unions are typically more flexible than banks when it comes to approving loans since they are usually privately-owned.
If you don’t meet the minimum credit score requirement, you may still be able to get a loan from your bank or credit union if you can prove you can pay the loan back. Offer proof of income to show that you make more than enough money to pay back the loan in a timely manner. A cosigner with good credit can also make the lender more comfortable, knowing that there are two people accountable for the loan.
3. Shop Around for the Right Loan
If you get a loan offer from the bank or credit union, don’t immediately take it. They may not offer the best loan rate. Check around with other reputable lenders to see if you can get a better interest rate. You should also figure out what kind of loan will work best for you, both for your needs and your credit situation.
There are a few different types of personal loans you may consider, each with their own pros and cons:
- Secured personal loans involve collateral, whether that’s property or a down payment. Secured loans are generally easier to get than unsecured loans for people with bad credit.
- Unsecured personal loans do not involve collateral, which makes them riskier for lenders. If you get an unsecured loan, it will likely come with a high-interest rate.
- Payday loans are intended to be a very short-term solution, and they come with high-interest rates. This is one of the least desirable types of loans because they are so expensive, even over the short term.
- Peer-to-peer lending is a newer personal loan option that is generally provided through crowdsourcing. While these loans eliminate the financial institution as the middleman, they can require a higher credit score to get approved.
4. Watch Out for Scams!
Because people with bad credit seeking personal loans are often in a tight spot, scammers will try to take advantage of you. They may offer great-sounding loans, but require your credit card or other information first. Then they may either just take your money and run, or give you a loan with a sky-high interest rate.
The number one red flag is the lender not caring about your credit score. If they offer loans with no credit check, it’s almost certainly a scam. You should also check the URL bar. Some scammy lenders won’t have a secured site (signified by “https” and a green lock next to the URL). If the site isn’t secure, then neither is your data.
If you aren’t sure if a site is a scam or not, check them out on the Better Business Bureau. You can also call your state’s Department of Banking/Department of Financial Regulation to get more information about the company and determine if they’re registered to do business in your state.
Perhaps the easiest way to avoid scams is to only try to get a personal loan from a trusted source. Your first bet should always be your bank or credit union. But if that’s not an option, choose a source that is highly recommended online. You can find numerous legitimate options on sites like NerdWallet and The Balance, which are reputable sites that aggregate loan options for just about every credit score.
At Your Own Funding, we do all we can to help those who need quick personal loans get the cash they need. We’ll let you know upfront how much you can expect to pay over the life of the loan, and all of your options that don’t involve borrowing. Fill out our online form today to get paired with a personal loan in as little as 24 hours.