Posted by What are the best loans for poor credit? Having a bad credit score will limit your ability to qualify for a personal loan. Just like with most financial products, the borrowers are required to submit an application that shows their income information and must agree to a credit score check before being approved for the loan amount they requested.
Moreover, most lenders prefer to work with people who have a record of paying their bills early and making enough money to pay off their debt while adhering to the terms and conditions.
Although some lenders require a good credit score of 670 before you can be qualified for any loan amount, there are still a few lenders that offer loans to people who have a credit score between 580 and 600 to help them borrow money for unexpected expenses, which include auto repairs, medical bills, and debt repayments.
However, it is worthwhile to know that the interest rate on personal loans varies depending on the qualification requirements and your credit score. So if you have a bad credit score, there isn’t any chance that you will get the lowest rate or favorable loan terms.
The only thing you should be worried about is finding the lender that will offer you the loan amount your credit score qualifies for. This is why we have taken the time to round up some of the lenders that offer personal loans to people with bad credit scores. So, if you have a low credit score and need a loan, read through to discover the best places you can obtain a loan from.
What Are Poor Credit Loans?
Poor credit loans are designed to assist individuals with poor or nonexistent credit scores. Securing a loan with a credit score below 580 can be challenging, but it’s worth exploring your options.
Thankfully, certain lenders are open to extending loans to applicants with subpar credit histories. The minimum credit score required can vary from one lender to another, so it’s essential to verify whether your credit score meets the lender’s eligibility criteria.
Applicants with low credit scores can expect to encounter higher interest rates and potentially receive lower loan amounts, reflecting the impact of their credit history.
How Do Poor Credit Loans Work?
Bad credit loans work just like other personal loans. They have fixed rates, and they are paid in a fixed monthly installment within the agreed repayment period.
These loans are not backed by collateral because they are unsecured. Although you might qualify for a personal loan with a poor credit score, your interest rate will likely be on the high side of the lender’s range, and your loan limit will be much smaller than your initial request.
Bad Credit Loan Rates
Lenders will calculate the interest rate depending on several variables, which range from the size of your income to your creditworthiness, along with the repayment term.
This is because your credit score plays an important role in deciding the interest rate you will receive. Don’t expect to receive the lowest rate because you have a bad credit score.
However, the lowest rates are reserved for people with a good credit score. If you want to receive a low interest rate, then you should work on your credit score before applying for a loan.
| Borrower credit ratings | Score Range | Estimated APR |
| Excellent | 720-850 | 14.5% |
| Good | 690-719 | 16.49% |
| Fair | 630-689 | 19.04% |
| Bad | 300-629 | 21.18% |
Bad Credit Loan Fees
Bad credit loans are excellent options when you don’t have any other options; however, they come with a high fee. Before agreeing to the loan, you need to have an understanding of the cost so that you will be able to manage your debt. Some of the fees include:
- Prepayment Penalties: Some lenders will charge a fee if the borrower pays the loan before the repayment term ends. This fee is around 2% of the outstanding loan balance.
- Late Payment Fees: Lenders usually charge a late fee when the loan payment is not made on time. The loan amount can vary, but it is usually $15 to $25 of the loan amount.
- Loan Origination Fees: This fee covers the cost of processing another loan application. They usually range between 1% and 8% of the total loan amount.
- Non-Sufficient Funds Fees: If the borrower’s account doesn’t have enough funds to repay the loan, then the lender will impose an NSF fee. These fees typically range from $10 to $35.
These fees depend on the lender’s policies and the information in the loan agreement. Make sure that you read the loan agreement carefully to understand all possible costs associated with your loan.
Types of Loans for Poor Credit
There are different types of bad credit loans, and each of these loans serves a different purpose to meet certain financial needs.
Secured personal loans
Secured loans are the type of loans that require collateral, such as a car or a home. This loan provides more favorable rates and terms, along with higher loan limits, because you have a higher chance of paying your loan back. If you have a bad credit score, it will be easier to qualify for a secure loan.
Unsecured Loans
Unsecured loans do not require any collateral, and the interest rate you will receive will be determined by your creditworthiness. And this means that it can be a little harder for you to qualify if you have a bad credit score.
Payday Loans
Payday loans are short-term loans that you can repay as soon as the next paycheck hits your bank account. Most lenders do not require a credit score, and this is good for people who have a bad credit score.
Auto Loans
This is the type of loan that uses your car as collateral to be approved for any loan amount. This means that the lender will be able to repossess your card if you don’t pay for your loan. Auto loan qualification requirements are quite similar to those of personal loans.
Home Equity Loans
Home equity loans provide the money upfront, and this can be paid back in a fixed monthly installment. This type of loan uses your house as collateral.
These are the types of loans that you can apply for if you have a bad credit score. You can shop around to compare lenders and decide which one is best for you.
How to Qualify for a Bad Credit Loan
It is not easy to get a loan if you have bad credit. But there are some tips that you can follow to increase your chances of getting approved for the loan:
- Check your credit: Make sure that you check your credit report and fix any errors with the credit bureaus. Make sure that you check your credit score to determine which lender could provide the loan amount you need.
- Shop for rates and get preapproved. You can check with as many lenders to get preapproved for a loan. This will tell you what kind of loan you are qualified for and how much it will cost you.
- Try credit unions: Several local credit unions provide better loan approval and rates for people with bad credit scores.
- Use collateral: Providing collateral such as jewelry, a car, or even your savings account balance can be an ideal way to enhance your chance of approval if your lender accepts it.
These are the tips that you can follow to increase your chances of getting approved for a bad credit loan.
Best Loans For Poor Credit
Several lenders offer personal loans to people with bad credit scores. Some of these lenders include:
LendingClub
LendingClub is a peer-to-peer lending marketplace where the loan amount is up to $40,000, and you will get the reimbursement within 24 hours.
It is one of the leading platforms for borrowing money, and it has worked with more than 3 million customers and funded over $55 billion in loans.
You will also get to change your due date, either as a one-time occurrence or a permanent one. However, make sure that you know how to change your payment deadlines, which could affect your interest rates.
To change your due date, you will need to be consistent with your payment. In addition, this platform also provides a joint personal loan for borrowers with a bad credit score.
To qualify for this loan, you need to be an American citizen and be at least 18 years old. This platform also makes debt consolidation much easier by providing a balance transfer loan.
Universal Credit
Universal Credit is also an online lending platform that provides personal loans ranging from $1,000 to $50,000 via its partners. Its repayment term also ranges from three to seven years.
Although Universal Credit makes it easy for people with bad credit scores to find a personal loan, This lending platform has a high APR, and it charges a 5.25% to 9.99% origination fee on all its loans.
Upgrade
Upgrade was created in 2017, and it offers accessible online and mobile banking and credit services. This platform has made over $3 billion in credit for more than 10 million applicants, and it has continued to expand its online and mobile services.
The loan amount ranges from $1,000 to $50,000, and it has 2 to 7-year terms available. Upgrade also charges an origination fee that ranges from 1.85% to 9.99% of the loan, and the borrowers will be charged a fee of $10 if their payment is late.
Using this platform, borrowers can check their balance and update their details.
Happy Money
Happy Money bad credit loans are specially designed to help borrowers pay their credit card debt. Although you might not be qualified for this lending platform, their loan rates might be lower than those of others on your credit card.
If you are eligible for this loan, you will get the disbursement within the next three to six business days.
Upstart
Upstart provides flexible loan amounts to borrowers, and it offers larger personal loans for people with poor credit scores. The minimum amount that you can borrow will be determined by your state of residence.
It also takes into account your area of study, level of education, and employment history. The application process is also much easier for people with a bad credit score.
Where Can I Get Poor Credit Loans
Personal loans for bad credit can be found at different types of institutions. Here are some types of lenders with whom you can start your search:
Online Lenders
When you are applying for an online personal loan, the process is completely online. You will need to fill out an online application and then submit documentation to verify your income, identity, and address.
Banks
If you have an account with a traditional bank, then you can check to see if they will provide you with a personal loan with your credit score.
Credit Unions
Rely more on information such as your credit and income, but you might also consider your history. You can check with the credit union in your area and consider the personal loan it provides.
These are the available options for getting a bad credit loan. You can also consider a payday loan if you are not approved for a bad credit loan.