It is tough to get personal loan with bad credit or with no credit, but not impossible. Traditional banks may refuse you loan with bad credit but there are other options such as credit union, peer-to-peer lending, home equity or debt-consolidation, help you improve your credit score and increase chance of future lending. With some search and working you may able to find best suitable personal loan for you.
You must shop around and compare various interest rate offers. Check APRs, fees, loan amounts and other charges for selection. You must understand what bad credit is and how it does harm to your name reputation and affect the approval of loan application. You must not apply for any loan, unless you are ensured to pay off loan. Missing payments or defaulting may make the situation more complicated and problematic for your finances and future borrowing.
Bad credit means low credit score or short credit history. Late payments and maxed out credit cards are the reason to make you bad credit holder. People with bad credit score are considered risky and offered high interest rates.
For every lender, the criteria of bad credit score may vary. Some does not give much importance to low credit and some only likes to work with good credit holders. Terms are not ideal but people may able to get bad credit loans which is their only option available.
Bad credit loans are either secured, with collateral such as home or car, or unsecured. This bad credit loan gives you opportunity to help build your credit history.
Here are two options to get personal loans with bad credit.
Secured loan
Secured loan require collateral, like a car or a home, it will be easy to get bad credit loan in the presence of security of collateral. With secured loan, you will be able to get more favorable rates, terms and less APR. The common secured loans are home-equity loans, auto loans and mortgages. You may risk losing your asset, if you miss or default on your payments.
Unsecured does not require collateral and interest rates are decided based on consumers creditworthiness. It means low credit holders have less chance of getting approval for personal loan. Unsecured loans require high interest rates and lower loan limit, which may not be enough for your financial need.
If you are rejected by online lenders for loan with bad credit, and you have an emergency and need urgent cash. Try traditional banks or credit unions, where you can discuss your financial situation in-person and convince them that you are creditworthy.
Here are some benefits of applying personal loan from online lenders. They work very fast and make decisions in minutes. They deposit loan amount within days in your accounts. Some online lenders may not charge prepayment fee and application charges.
To avoid rejection of your loan application due to bad credit score, you must work on it. Here are some tips to keep in mind when applying for loan.
- You can get an idea of how much is safe to borrow by using a personal loan calculator.
- Plan you’re your weekly budget to make sure you are able to afford the repayments.
- Save money in reserve for emergencies and avoid defaulting.
