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Having a good credit score can be very useful if you need to borrow money. When you have bad credit, it can be difficult to get a personal loan, especially one with low interest and no fees. But some lenders cater to borrowers with bad credit scores.
Here’s how to get a loan with bad credit and what you need to know about this specific type of credit product.
If you need a personal loan, visit Credible for see your prequalified rates from various lenders, all in one place.
1. Check your credit report and background
Before applying for loan for bad creditIt’s a good idea to check both your credit report and your credit history to see where you stand. Knowing your credit score can help you determine the types of loans you can qualify for, which lenders to apply to, and which ones to skip if you’re unlikely to meet their requirements.
Reviewing your credit report gives you the opportunity to spot any errors or potential fraud and report them to the credit bureau. If certain items on your credit report are found to be in error, the credit bureau may remove them from your report. This can usually improve your credit score, with little effort on your part. You can also review your report to see areas you can improve to qualify for better loan products in the future.
The reason lenders like to see high credit scores is that a low credit score is usually the result of negative marks on your credit report, such as late payments or debts in collection. A low credit score tells a lender that you are more likely to miss paying your debts or default on the loan, which can be very costly for the lender.
WHAT CREDIT SCORE DO YOU NEED FOR A PERSONAL LOAN?
2. Pre-qualify for a personal loan
When you apply for a Personal loan, you trigger a serious investigation into your credit report, which temporarily lowers your credit score. It’s unavoidable if you want to get a personal loan, but you can avoid having an unnecessary credit check on your file.
Before officially applying for a personal loan, prequalify with lender to get an estimated loan offer. When you prequalify, the lender only performs a simple investigation of your credit report. So if the lender tells you that they probably won’t approve your loan application or presents you with terms that you know you won’t want to accept, you can ignore the official request to that lender.
Credible, it’s easy to compare personal loan rates from various lenders, and it will not affect your credit.
3. Compare bad credit loans
Before you prequalify, research which lenders accept your credit score so you don’t waste time and energy with lenders who won’t work with you.
Several lenders offer personal loans to borrowers with lower credit scores. These lenders often consider other information when reviewing your application, such as your employment and Income. While most lenders tend to require a score of at least 580, some lenders don’t even require a credit check.
It is important to compare prequalification offers from at least three to five different lenders. This way, you can find a loan that best suits your financial situation.
4. Find a co-signer
You don’t have to apply for a loan meant for borrowers with bad credit. One way to increase your chances of qualifying for a Personal loan – and get a lower interest rate – is to apply with a co-signer who has a higher credit score than you. It can be a trusted friend or family member.
However, the co-signer must be careful. They will be responsible for making loan repayments if you are unable to do so. If you and your co-signer fail to make your payments, or if you make your payments late, your credit ratings may suffer.
HOW TO FIND A COSIGNER FOR YOUR STUDENT LOANS
What to consider when looking for a loan for bad credit
Not sure if taking out a personal loan when you have bad credit is the right decision for you? Here are some factors to consider:
- Shop around for the best deal. Just because your credit score is low doesn’t mean you should accept the first personal loan offer that comes your way. Compare personal loan offers from a few different lenders to see which one has the lowest interest rates and fees, as well as a loan amount and repayment term that suits your needs.
- Bad loans come with higher fees. To offset their risk, lenders often charge higher fees when lending to consumers with bad credit, such as application or origination fees for processing the loan.
- Interest rates are higher. Lenders also tend to charge much higher interest rates when you have bad credit. It may be worth waiting until you have improved your credit score to apply for a loan, as a higher interest rate will cost you significantly more over the life of the loan.
If you’re ready to apply for a personal loan, head over to Credible for a quick and easy compare personal loan rates to find the one that best suits your needs.