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Get A Personal Loan With Bad Credit
A bad credit loan is a short term financial fix for consumers who need money but have a bad credit score or poor credit history (Means they don’t generally borrow from any financial institution and hard to check their credit score as there is no any record to prove their credit worthiness).
It’s not a perfect fix. Interest rates on bad credit loans are higher – in some cases considerably higher – and terms are short, one to five years. But consumers whose credit score is poor and have significant financial needs, may find this loan can help them get their feet back on the ground.
Look at it as a personal loan. Try not to focus on the interest rate. Instead look at the financial wherewithal it provides. But … do not take out any loan that does not fit your budget. Advice on budgeting and loans is available form a nonprofit credit counselor.
Bad credit loans are just another name for personal loans.
Consumers borrow what they need and then make regular monthly payments. The good news is the loan can be used for just about anything — from consolidating credit card debt to paying medical bills to buying a car to making a major repair to the home. Swallowing the bad taste of the higher interest rate is simply part of the process.
Don't waste your time. Get a loan online.
Finding a bad credit loan can be a challenge. Stick to it. Diligence will be rewarded. The loan could come from your regular bank, but more affordable interest rates and flexible qualifying requirements probably can be found with these options:
- Credit unions – Typically have more flexible lending standards than banks and may be willing to offer a small personal loan. Membership is easy to obtain, in most cases.
- Family or friends – It’s easier to qualify and hopefully has lower interest rates. Credit history also may not count as much here if you have maintained decent relation with them.
- Find a co-signer – Use someone else’s high credit score to lower your interest rate.
- Borrow from the equity in your home – Credit score is not a factor. If you have equity in the house, this is an attractive debt relief option.
- Peer-to-Peer Loans – These are loans from an individual or group of individuals rather than a lending institution.
- Online Loans – This is a significant market of lenders, who can be flexible with terms.
- Negotiate an Agreement with Your Bank – Use a long-term relationship with your bank to obtain a short-term loan at reasonable rates.
- Cash advances – Not advised because this is an expensive option, but in an emergency, it’s available.
Other options like borrowing from a retirement fund (must be paid back or face a penalty); borrowing against life insurance (more penalties); and payday loans (exorbitant interest charges) exist but are risky. A better alternative would be to consolidate debt.
What Is Considered a Bad Credit Score?
Credit scores range from 300-850 and though there is no official start to the “bad credit score” category, it’s safe to say if you’re under 650 you are considered a high risk, which means you will pay the highest interest rates.
People in this category are prime candidates for bad credit loans.
The definition of a “good” and “bad” credit score does vary from lender to lender. Some won’t touch anyone with a credit score under 650; some actually market to consumers with a sub-650 score.
So it’s hard to say what makes you “good” or “bad” on the credit scoreboard, but the accepted range looks something like this:
- 760-850 – Excellent
- 700-759 – Very good
- 660-699 – Fair
- 620-659 – Poor
- Scores under 620 – Extremely poor
How to get a personal loan with bad credit
If this is not an emergency, the first step would be to improve your credit score so you are able to afford the loan you need.
Pay bills on-time, especially on credit cards; reduce the balance on cards to less than 30% of the credit limit allowed. Finally, don’t apply for any new credit.
The combination of those three factors – on-time payment; low credit utilization; no new credit applications – account for 75% of your credit score. It’s not unrealistic to think that making an effort on those three fronts could raise your score by 100 points in as little as 3-to-6 months.
If, however, this is an emergency and your application for a loan has been turned down repeatedly due to poor credit or no credit, it might help to ask a bank or credit union loan officer for an in-person interview to convince them you are creditworthy.
If you get that interview, be sure you are prepared with documents that prove you’re a better risk than the credit score suggests. Lending institutions love stability. It definitely helps your case if you can show them that you’ve lived in the same house (or city) and worked the same job (preferably for the same employer) for several years.
Common things to bring that prove your credit worthiness include:
- Tax returns, W-2s and 1099 forms from at least the last two years
- Details of your job history, including salary and pay stubs
- List of assets such as home, car, property and where you stand on paying them off
- List of unsecured debts such as credit cards, student loans and medical bills
- Whether you pay or receive alimony or child support
- Bank statements for checking, savings and CDs
Not all of these documents are required, but if you have a poor credit history, anything you can produce that demonstrates you have become responsible with your money will be considered a plus. You should also expect the lender to ask questions about your credit history that may reflect negatively on you. Things like:
- Have you been involved in any lawsuits?
- Do you have any court judgments against you or items in collection?
- Have you declared bankruptcy or had a foreclosure judgment against you?
- What is your ethnic background?
