How to Get a Personal Loan With Bad Credit
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How to Get a Personal Loan Even if You Have Credit Scores that aren’t great Credit
For those with poor credit, they may need to take extra steps to qualify for a personal loan or to secure an interest rate that is better.
Last updated on Oct 11 2022.
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Table of Contents
Table of Contents
A poor credit score shouldn’t have to be a hindrance in the chances of getting an individual loan to pay for an emergency or to consolidate debts.
People with poor credit (a 629 or lower score) may need to do some additional effort to be eligible, but doing so can help you get approved and may result in an interest rate that is lower.
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Five steps to secure a personal loan with bad credit
Examine your credit score . Most lenders require a minimum credit score minimum, and you might be denied if you do not satisfy it. Numerous financial firms, like NerdWallet offer a service that offers a free, detailed review of your credit history throughout the years. There are likely to be errors on your credit report, and fixing them could boost your credit.
Compare lenders. There are no two lenders that have the same borrower requirements or rates, so it’s important to look at a variety of alternatives. You should choose a lender that offers a price you can afford as well as other tools to build credit as well as fast funding. You can also use an app that lets you manage loan payments.
Pre-qualify. This will tell you the rate, loan amount and repayment timeframe to anticipate and doesn’t impact your credit score. It’s particularly helpful if you’re trying to figure out if you qualify for an loan and want to compare offers. Many online lenders and banks offer this feature.
Include it in your application. Co-signed and secured loans can help you qualify or get a lower rate on the personal loan. With a , another person’s credit and income information are included in the loan application and that person agrees to pay for the loan even if the borrower doesn’t. You can offer collateral, typically such as a savings or car — which lenders can use if the loan isn’t fully repaid.
Apply. It’s beneficial to gather all the documents you require prior to applying, in order to speed up the process. These can include W-2s, pay bills, financial statements and your Social Security numbers. Some lenders will provide you with an answer within the same or next day after applying.
See if you pre-qualify for an individual loan and it will not affect your credit score
Simply answer a few questions to get customized rate estimates from several lenders.
The loan amount
on NerdWallet
What is the impact of bad credit on a personal loan application
When looking over an application for loan request, the lender will determine not just if they will accept your application but additionally on the rate of interest they will charge and how much money to lend to you.
The lender might inform you that you have struggled to make payments toward credit card debt or any other type in the past. As a result, the lender might be taking on more risk by loaning you money. This would make the lender deny your request or approve the small loan with a higher . If you do not need this loan urgently, make sure you take the time to think about it before applying.
These are average annual percentage rates of the borrowers of each credit band.
What’s your credit score?
Score range
Estimated APR
Excellent
720-850.
11.3%.
Good
690-719.
15.6%
Fair
630-689.
22.3%.
Bad
300-629.
25.2%.
Source Rates are calculated based on aggregated information from offer data that is anonymized from customers who were pre-qualified for NerdWallet’s lender marketplace from the 1st of July, 2022 through Oct. 31, 2022. Rates are only estimates and do not apply to all lenders. The credit scores with the lowest scoregenerally lower than 500 are not likely to be considered. This table applies only to lenders with APRs less than 36%.
Each lender weighs credit scores in different ways. Your , employment history and even whether you rent or own your home could also be considered on an application.
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Where to take a loan with bad credit
Credit unions. You must be an active member of a credit union to access its loans, but they’re one of the most suitable options for bad credit.
consider the loan applicant’s history as a member when making a decision. This means a good rapport with the credit union may assist in obtaining the approval process.
You can also receive lower rates from a credit union that is chartered by the federal government because APRs are set at 18%. Other lenders’ rates could increase to 36%.
Online lenders . Some online lenders, like and , offer loans to low-credit borrowers. Online lenders may include consumer-friendly features, like fast funding and advice to help build your credit.
It’s best to look at online loans against offers from different types of lenders to discover the most competitive cost.
Nerdy Tip
Some lenders who have bad credit add an origination charge that’s typically 1% to 10% from the loan amount. The majority of lenders subtract the fee from the loan before transferring the funds into your account, meaning you could end up with less money than you had hoped for. If there is a fee included make sure that the remaining loan amount is enough to cover the cost.
Avoid no-credit-check loans
It could be tempting to borrow from a lender that won’t even look at the credit rating of your applicant, however they typically offer predatory high-interest installment or payday loans.
A lender that doesn’t review information like your credit score isn’t checking your capacity to pay. Certain lenders who offer a loan the borrower a vicious cycle of debt by charging high rates that make payments unaffordable, causing them to take on more debt at the time the payment is due.
If you don’t think you’ll qualify with a lender who checks your credit score, consider .
Calculate bad-credit loan payments
Be aware of the loan’s monthly payments and total interest cost prior to when you borrow. Being punctual with your payments can help you build credit while missing payments could damage your credit further. Knowing how much you’ll be paying in total interest will help you determine if this loan is worth it.
Many lenders let you preview loan installments during pre-qualification but you can also utilize an individual loan calculator to get an estimate.
About the writer: Annie Millerbernd is a personal loans writer. Her writing has been featured in The Associated Press and USA Today.
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