Getting a personal loan can be easy, even if you have bad credit – here’s all you need to know
When your credit rating is low and you’re looking to get a personal loan, you’ll need to deal with a lender that looks at more than your credit score. Transparency in rates and fees is equally important. If you’re not sure about how bad credit personal loans work or what to look for in lenders that offer those loans, look through this guide before you sign.
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How do bad credit personal loans work?
Your first have to find for lenders that provide loans to people with poor or bad credit scores. These lenders may look at your credit history, but they also take your existing financial condition, and ability to repay into account. Depending on the lender you choose you can apply in-store or online, but remember that you’ll have to meet some basic eligibility criteria.
If you apply in-store, you can get your hands on the approved cash almost immediately. With online loans for bad credit, the money transfers into your nominated bank account. While some lenders may give you access to funds on the same day, others may require you to wait in between one to three business days, or longer.
You’ll get the following features with a bad credit loan
If you’re looking at personal loans for bad credit examine these key features:
- Unsecured. These loans are typically unsecured, so you don’t have to provide any kind of collateral.
- Quick process. You can apply for most such loans in minutes, and you can expect to find out about your application’s status soon after. If you need access to money quickly you can look for lenders that provide access to approved funds on the same day or by the following business day.
- Fixed rates. Bad credit personal loans usually have fixed interest rates, so you don’t have to worry about your repayments fluctuating over time.
- Use money for different purposes. If you have debt on a high interest credit card you can consider taking a personal loan to consolidate your existing debt. This can help you save on interest charges and simplify your repayments. You can use proceeds from such a loan to buy a used car, repair your car, make home renovations, take a vacation or for any other worthwhile purpose.
- Prepay and save. Some lenders let you repay your loan ahead of time without charging any additional fees. Doing this can reduce how much you end up paying in interest.
What types of bad credit personal loans are there?
In your search for bad credit personal loans, you have the following options:
- Payday loans. Payday loans are short-term loans that you typically have to repay by your next payday. You don’t have to provide any collateral to secure these loans, but you can expect to pay a higher than usual APR. These loans are not legal in all US states.
- Installment loans. An installment loan requires you to make equal periodical repayments over a predetermined loan term. These loans don’t require any collateral, and normally charge lower APRs than payday loans.
- Auto title loans. If you have a car or a motorcycle you can use its title as security and get an auto title loan. Since you’re providing security, you can expect to pay a lower APR when compared to payday or installment loans. You’ll have to repay such a loan in installments over a predetermined time period. If you don’t make the payments, the lender can take possession of your vehicle.
- Cash advances. Cash loans for bad credit are essentially the same as payday loans. If you have a credit card, you may be able to use its cash advance facility to withdraw money from an ATM. If you have a steady job, you might consider getting a cash advance from your employer.
Things to avoid with bad credit personal loans
If you already have poor or bad credit history, make sure you have a repayment plan in place before you apply for any further loans. Failure to repay the loan in a timely manner can have a further adverse effect on your credit rating. Avoid applying for multiple loans at or around the same time, as prospective lenders don’t view this favorably.
The APR you pay can have a significant effect on how much your loan ends up costing, so make sure you compare this aspect carefully. Paying attention to fees and charges you may have to pay under different circumstances is also important, as these can vary considerably.
Can I get a loan if I’m receiving social assistance?
Frequently asked questions about bad credit personal loans
What is the maximum amount I can get through a personal loan for bad credit?
This depends on the lender you choose as well as your creditworthiness, existing financial situation and ability to repay.
Do providers of online loans for bad credit require me to fax any documents?
Online lenders usually do not require you to fax documents over. Most lenders can accept your credentials online, so you don’t have to send any documents over.
What makes up my credit score?
Factors that affect your credit score include your payment history, the money you owe, length of your credit history, types of credit you use as well as how often you apply for new credit.
Can I get a loan if I'm on welfare?
As with any personal finance decision, the ability to repay what you borrow is crucial. However, if you’re receiving government benefits you can still qualify for a loan. Click here to learn how.