Do you worry about where to get a personal loan with bad credit? 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. Well, there’s good news for you!
You can still get a personal loan despite having bad credit. In this blog, we dive deep into the benefits of getting a personal loan, where to get a personal loan with bad credit, and how to improve your chances of getting a loan with bad credit. If you need financial assistance to make payments, try Beem, the best alternative app to instant cash advance, without credit, zero interest and no income restrictions.
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. It means they are offered against security such as property, gold, financial securities, etc., and at higher interest rates and customized terms and conditions according to the lender.
Benefits of Taking a Personal Loan With Bad Credit
While applying for a personal loan with bad credit be frustrating as there are a limited number of lenders who offer to lend money at a higher rate of interest. There are still some benefits of taking a loan with bad credit.
Access to Funds
One of the prime benefits of getting a personal loan is that you get immediate funds to cope with your financial needs. It can be an unexpected medical emergency, renovating your house, taking a loan for your wedding, etc. Personal loans have faster approval systems and provide you 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, which may help you to avail of unsecured loans with lower interest rates in the future.
Alternative to Payday Loans
Personal loans are a better alternative 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 amount in a given time frame without getting overwhelmed.
Can Personal Loan 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
It refers to the various types of credit accounts you have. If you add a personal loan to your credit mix, it will demonstrate that you can pay a fixed financial obligation. It 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. It 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, reducing the chances of any missed payment and lowering your credit utilization, overall improving your credit score.
Where to Get a Personal Loan With Bad Credit?
While getting a personal loan with bad credit may be challenging, you can still get a loan from online lenders and a limited number of banks and credit unions. 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.
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 chance of getting a personal loan with bad credit.
Compare Lenders
Different lenders have different rates and requirements, so 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 on your own, 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.
Also Know About Installment Loans vs Revolving Credit
Conclusion
So, where to get a personal loan with bad credit? It might be 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, such as the flexibility to the funds one needs. Use the Beem app to improve your credit score and get the best personal loan offers for your need.
In some cases, a personal loan proves way better than other loans, such as a payday loan. With the right approach, you can use it to improve your credit score by making timely repayments and reducing credit utilization which can avail you of better loan options. Keeping a good strategy and proper research can help you find a lender offering a personal loan that meets your needs and preferences.
