A bad credit score can make applying for a loan seem like an uphill battle. But financial emergencies may strike anyone. Many companies hesitate to lend a loan to an individual with a bad credit score as it increases the chance of default in payment. The good news is you can still get a personal loan despite having bad credit. In this blog, we dive into where to get a personal loan with bad credit.
Can I get a personal loan with bad credit?
The short answer is yes, you can get a personal loan with bad credit. Loans specially designed for individuals with low credit scores are known as bad credit loans. These loans are generally secured loans offered against security such as property, gold, financial securities, etc. They are offered at higher interest rates and customized terms and conditions according to the lender.
Benefits of taking a personal loan with bad credit
Applying for a personal loan with bad credit is frustrating as few lenders make offers at higher interest rates. There are still some benefits of taking a personal loan with bad credit.
- Access to funds: A prime benefit of a personal loan is that you get immediate funds for your financial needs. This could be it an unexpected medical emergency, renovating your house, taking a loan for your wedding, etc. Personal loans have faster approval systems and provide you the flexibility in how you want to use your funds.
- Improve your credit score: Timely repayment of your loan helps to build a good relationship with your lender and improve your credit score. This may help you to avail of unsecured loans with lower interest rates in the future.
- Alternative to payday loans: Personal loans are better than payday loans. The APR is around 600 for payday loans, while the maximum interest rate on a personal loan is around 33 percent. The timeline for repayment is also short for payday loans, usually by your next payday, around two to four weeks. This short repayment time sometimes makes it challenging to repay the amount, forcing the borrowers to renew the loan and add the interest to the principal amount.
- Debt Consolidation: Debt Consolidation is a primary reason for taking a personal loan. Paying off your multiple high-interest-rate loans with personal loan groups all your monthly payments into a single payment. This grouping of multiple payments into a single price helps you repay the loan in a given time frame.
Can personal loans help improve bad credit?
Yes, a personal loan helps to improve your bad credit score. Here’s how.
- Payment History: Making timely payments positively impacts and boosts your reliability as a borrower and credit worthiness.
- Credit Mix: Credit mix refers to your different types of credit accounts. Adding a personal loan to your credit mix demonstrates that you can pay a fixed financial obligation. This is more challenging than paying a varying amount that suits your current financial state, showing that you are a low-risk borrower.
- Credit Utilization: Credit utilization is the ratio of your overall available credit to your current use on your revolving credit accounts. Credit utilization has a 35.99% impact on your credit score, as observed by the FICO mode. Paying your debts with personal loans can lower credit utilization, thus improving your credit score.
- Debt consolidation: Again, paying off your high-interest rate loans simplifies your debt management. This, in turn, reduces the chances of any missed payment and lowering your credit utilization, improving your credit score.
Where to get a personal loan with bad credit?
Researching where to get a personal loan with bad credit may take time and effort. Still, online lenders and a limited number of banks and credit unions offer loan options. Some lenders that offer bad credit loans include Upstart, LendingPoint, Avant, and Universal Credit. The credit score for these lenders generally starts from 550. However, a credit score is one of many requirements for these lenders. Additionally, some lenders do not have credit score requirements. However, these no-credit-check lenders charge a very high rate to compensate for the risk. So ensure before taking a loan from these lenders whether it is worth it.
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How to apply for a personal loan with bad credit
The options for getting a personal loan for individuals with bad credit scores are limited. However, here are some steps that can help you to increase your chances as you look for where to get a personal loan with bad credit.
- Compare lenders: Different lenders have different rates and requirements. Research to find the best interest rate and terms that suit your needs.
- Add a co-signer: If you are not eligible for a personal loan, you can add a trusted friend or family member, a co-signer with a better credit score and more income than you do. A co-signer does not receive any loan amount and can not access payment information but is required to pay the loan amount if the borrower cannot. If the borrower fails to pay the loan amount, the credit score of both the borrower and co-signer is affected.
- Add collateral: Some lenders offer a bad credit loan with a lower interest rate against some collateral, such as your house or vehicle. So if you fail to repay the loan amount, the lender can take your collateral.
Beem can help you find, compare options and choose the best personal loan to meet your needs.
Conclusion
When exploring where to get a personal loan with bad credit, you will find that this is difficult for an individual with a bad credit score as the options are minimal. However, you can still get a personal loan at a higher rate of interest and customized conditions according to the lender. A bad credit personal loan may feel like a burden, but it also comes with its benefits. These include the flexibility to the funds one needs. Moreover, in some cases, a personal loan proves way better than other loans.
With the right approach, you can use it to improve your credit score by making timely repayment and reducing credit utilization which can avail you of better loan options. A good strategy and proper research can help you find a lender offering a personal loan that meets your needs and preferences.
