Having a bad or poor credit score generally makes it tough but not impossible to avail a personal loan. Credit unions, Peer-to-peer loans, Home equity, and even debt consolidation without any loan can definitely improve your credit rating. This, in turn, increases your financial options in the future. But a bad credit score will certainly not help you in getting a loan at a good interest rate. However, you can still try to find a bad credit loan at interest rates which are much lower when compared to those you would find on Payday loans*.
What are Bad Credit Loans?
Bad credit usually refers to low credit history or credit score. Acts such as late payment as well as maxed out credit cards contribute towards lowering your credit score.
Bad credit loans are usually an option for individuals whose credit scores reflect some sort of financial missteps. It is also useful for those individuals who simply wouldn’t have had the time to build any sort of credit history. Bad credit loans are either unsecured or secured personal loans. The applicable interest rate, loan tenure period as well as the processing fee varies from one financial lender to another depending on the kind of loan.
Several financial lenders such as banks, online lenders, and credit unions offer bad credit loans to those individuals who have poor credit. However, the criteria as to whom they consider creditworthy borrower varies from one financial lender to another. Few lenders have a good setup requirement when compared to others which makes it quite evident for an individual with a bad credit score to shop when looking for such bad credit loans.
What is Considered a Bad Credit Score?
Credit scores are usually a means to gauge your likelihood to repay a loan. The credit scores usually range from 300 to 850. If your number is higher, then it is more likely that you would repay the loan amount.
Bad credit score ranges from 300 to 650**. Individuals in this category are usually considered high-risk borrowers and end up paying the highest interest rates. Individuals in this category are usually the prime candidates who look for bad credit loans.
However, the definition of a good and bad credit score is quite subjective and varies from amongst different financial lenders. Some lenders do not prefer to offer financial products to those individuals who have a credit score below 650. Few financial lenders who like to market to different consumers will opt for individuals having scores below 650. A general descriptive score index can be as shown below:
- Excellent credit score: 760-850
- Very good credit score: 700-759
- Fair credit score: 660-699
- Poor credit score: 620-659
- Extremely poor credit score: Below 620
How can you get a Bad Credit Loan?
Availing a personal loan with a bad credit history though difficult, is not impossible. But it definitely requires some effort from your end to research the most affordable loan out there for you. Following are a few steps you can follow to avail a personal loan in case you have a bad credit history:
- Checking your Credit Score
The first step towards availing a personal loan with bad credit involves checking your credit score. Always remember that any individual is entitled to one free credit report on an annual basis from each of the credit reporting agencies.
- Look for a Guarantor
Several financial lenders are willing to offer loans to individuals with poor credit history if they have backing from a guarantor. This will prove to the lender that there are reduced risks associated with granting your loan.
- Compare between Different Bad Credit Personal Loans
If you are on good terms with any financial lender such as a bank or a credit union, and if your account is in a good position with regular paychecks, then you can try to avail a personal loan. Besides, you must also go through the reviews of different bad credit personal loans available online to find out any hidden or extra fees. This will also ensure that you have not missed out on any chance and have availed the best offer available.
- If possible take advantage of Pre-Qualifications
Prior to applying for any personal loan with different financial lenders, you are allowed to check if you pre-qualify for the personal loan without pulling any hard credit checks. This is quite an ideal way to shop around bad credit loans without creating any impact on your credit score.
- Look for Secured Loans
Few financial lenders also offer secured personal loans which are quite easier to avail for individuals who have a below-average credit score. Such loans are usually backed by certain assets like a car or your home. However, the advantage is that they have a lower APR which works out in your favor.