How To Get Approved For A Personal Loan With Bad Credit

Many say you have bad credit if your FICO score sits between 550 and 629. In other words, you’re seen as more of a risky borrower, which means some lenders may not give you a loan while others will charge you higher interest rates for that risk. Today we will discuss what you can do to get a personal loan with a 550-629 score and which lenders work with bad credit borrowers.

Loans To Avoid With Bad Credit

Before giving tips on how to get a personal loan with bad credit, let’s discuss two types of loans you should avoid.

The first is the payday loan, which many bad credit borrowers turn to since it does not consider your credit score and can offer fast approval. With a payday loan, you can get up to $500 to pay bills or other expenses. The lender will take repayment out of your next paycheck.

What’s so bad about payday loans? Besides the fact that they require fast repayment when you’re already in a pinch, their fees range from $10-$30 for every $100 borrowed, and their APRs can exceed 400 percent. In other words, payday loans are quite expensive.

The second option some bad credit borrowers turn to is the title loan, which is secured by your car’s title. After your car’s value is assessed, you will get a loan based on a percentage of what your vehicle is worth. If you fail to repay that loan, you will lose your car, as the lender will have the title.

As you can see, payday loans and title loans both come with high costs and risks. This is why a personal loan is your best bet for getting quick cash with bad credit.

How To Increase Your Chances Of Getting A Bad Credit Loan

You could get a personal loan with bad credit, but you will probably pay a higher interest rate (as much as 36 percent), so the lender can absorb the risk. If you still cannot qualify for a personal loan due to your credit history, try these tips to increase your chances of approval:

• Check your credit report for errors – You’re entitled to one free credit report per year. Get yours to check for any errors that could lower your score. Remove the errors to increase your score, and you could get approved for a personal loan.
• Use a co-borrower or co-signer – Find a friend or family member with better credit than you, and you could improve your chances of loan approval. Fail to repay the loan, and they will be liable.
• Add collateral to your loan – While many personal loans are unsecured, you could secure one with your car or bank account. Any failure to repay will result in the lender taking the collateral.

Follow These Steps To Get A Loan With Bad Credit

The steps to getting a personal loan with bad credit are relatively simple:

1. If you are a bank or credit union member, ask if they offer personal loans for bad credit borrowers. If not, try one of these online lenders: Universal Credit, Upstart, Upgrade, Seed, OneMain Financial, LendingClub.
2. Compare online lenders through prequalification, which lets you see the loans you qualify for without a hard credit pull.
3. Pick the loan with the lowest interest rate and best terms for your needs.
4. Apply for the loan online by supplying the required information. This will result in a hard credit pull that can lower your credit score.
5. Get an approval decision, usually within minutes.
6. Get funded after signing the loan agreement, sometimes on the same or the next day.
7. Repay the loan.
8. Build your credit score as you pay on time.