In this blog, we will discuss the possibilities of getting a Small Personal Loan with Bad Credit. Find out how to obtain such a loan, and insight on planning the repayment to improve your financial situation. Looking for the best personal loan offers for your needs? Use Beem to compare personalized rates and see what works for you.
What are Small Personal Loans?
A small personal loan is a fixed amount of money borrowed from a lender, typically ranging from a few hundred to a few thousand dollars, to be repaid over a set period with interest. These loans are unsecured, meaning they do not require collateral such as a car or house. People often seek small personal loans for various purposes, such as covering medical bills, car repairs, debt consolidation, or other unexpected expenses. Opting for a small personal loan can prove advantageous when you require a relatively more minor sum of money, helping you save on interest costs compared to larger loans.
However, having bad credit can make qualifying for traditional loans from banks or credit unions challenging. Bad credit implies a FICO score below 580, but requirements may vary among lenders. The good news is that some lenders specialize in providing small loans for bad credit situations. These lenders focus on factors beyond credit scores when evaluating loan applications, such as income, employment history, and debt-to-income ratio.
Credit score | Average loan interest rate |
---|---|
720-850 | 10.73%-12.50% |
690-719 | 13.50%-15.50% |
630-689 | 17.80%-19.90% |
300-629 | 28.50%-32.00% |
Table 1.0– Average loan interest rate by credit score
Can You Get a Small Personal Loan with Bad Credit?
Yes, you can get a small loan with bad credit, but it might require effort and research. The key is to explore alternative lending options that cater to borrowers with less-than-perfect credit. Here are some potential sources for obtaining a small loan with bad credit:
Online Lenders
Several online lenders specialize in offering small personal loans to individuals with bad credit. These lenders may have more lenient qualification criteria, and the application process is often straightforward and quick. With small personal loans from online lenders, like Beem’s Everdraft feature, you can get $20 – $1,000 instant cash for emergencies like paying bills, gas, groceries & medicines. Beem serves as the best alternative app to instant cash advances.
Credit Unions
Credit unions are nonprofit financial institutions that do work with bad credit members. They offer small loans for bad credit at competitive interest rates and flexible terms.
Payday Alternative Loans (PALs)
PALs are offered by some federal credit unions as an alternative to high-interest payday loans. The loan amounts granted through PALs range from $200 to $1,000, offering a reasonable scope to meet essential financial needs. These loans have lower interest rates and more affordable terms, with a maximum annual percentage rate (APR) of 28%, making them a suitable option for those with bad credit.
How to Get a Small Personal Loan with Bad Credit?
- Check Your Credit Report: Obtain a copy of your credit report from major credit bureaus before applying for a small personal loan. Review the report for any errors or discrepancies and dispute them if necessary. Correcting inaccuracies can improve your credit score.
- Research Lenders: Look for lenders explicitly stating that they offer small loans for bad credit. Compare interest rates, fees, and repayment terms. Choose a reputable lender with terms that suit your needs.
- Gather Necessary Documents: Prepare the required documentation, including proof of income, employment history, and identification. Lenders may also request bank statements and references.
- Consider a Co-signer: If you have a low credit score, a co-signer with a good credit history can improve your chances of approval and potentially secure better terms.
- Apply Online: Many lenders offer online applications for small personal loans. Complete the application accurately and honestly, providing all required information.
- Explore Peer-to-Peer Lending: Peer-to-peer lending platforms connect borrowers with individual investors willing to fund loans. These platforms often have more flexible lending criteria and are a viable option for individuals with bad credit.
How to Plan Payment for a Small Loan with Bad Credit?
While obtaining a small personal loan with bad credit is achievable, it’s essential to have a repayment plan in place to avoid further financial strain. Follow these tips to plan your loan payment:
- Budget Wisely: Create a budget that outlines your income, expenses, and the loan installment. Stick to this budget strictly to ensure timely loan repayments.
- Set up Automatic Payments: Most lenders allow borrowers to set up automatic loan payments. This can prevent late payments and improve your credit score over time.
- Avoid Taking on New Debt: Avoid the temptation to take on additional debt while repaying your small loan. Focus on reducing existing debt to improve your financial stability.
Conclusion
Obtaining a small personal loan with bad credit may seem challenging, but it’s not impossible. Explore other lending options, like online lenders, credit unions, and PALs, that offer small loans for bad credit. Try Beem’s personal loan feature to get information on personalized rates and explore loan options ranging from $500 to $100,000, without impacting your credit score!
FAQs
1. Can I Get a Small Personal Loan With Bad Credit?
Yes, you can get a small personal loan with bad credit. Many lenders specialize in providing loans to people with less-than-perfect credit scores.
2. What Minimum Credit Score Is Required for a Small Loan With Bad Credit?
The minimum credit score required may vary among lenders, but a credit score below 580 is typically considered bad credit.
3. Can I Improve My Credit Score With a Small Personal Loan?
Yes, by making timely payments on your small personal loan, you can gradually improve your credit score, as it demonstrates responsible borrowing behavior to credit bureaus.