Company Name | Est. APR | Min. credit score | Loan Amount | Loan term |
Upstart | 5.22% to 35.99% | 300 | $1,000 to $50,000 | 36 to 60 months |
Payoff | 5.99% to 24.99% | 550 | $5,000 to $40,000 | 24 to 60 months |
Discover | 5.99% to 24.99% | None | $2,500 to $35,000 | 36 to 84 months |
One Main Financial | 18% to 35.99% | None | $1,500 to $20,000 | 24 to 60 months |
Avant | 9.95% to 35.99% | None | $2,000 to $35,000 | 24 to 60 months |
NetCredit | 19.9% to 155% | None | $500 to $20,000 | 6 to 60 months |
What is Considered a Bad Credit Score?
According to myFICO, a credit score that’s lower than 580 is
considered poor, and one between 580 and 669 is fair. Any credit score under
670 is below the average U.S. consumer credit score and lenders will consider
that borrower a higher risk.
What Affects Your Credit Score?
The biggest factor affecting credit score is your payment
history. Any late or missed payment lowersr credit score. Credit
utilization–the amount of credit you’ve used in comparison to your available
credit–is another significant factor in
your credit score. The less available credit you’ve used, the higher your
credit score may be.
Other factors include your credit mix or type of credit, the
average age of your accounts, and the number of
recent credit inquiries. For credit mix, it’s best to have both revolving and installment
accounts and to keep your accounts open as long as possible to increase the age
of your accounts. Also, avoid too many hard credit inquiries.
What Are the Types of Loans for Bad Credit?
There are various types of loans you may be able to get with
bad credit, including:
- Personal loans: Personal loans are lump-sum term loans you
repay over a set period of time. Loans from finance companies for bad credit
will typically range from $1,000 to $50,000, have terms from 24 to 84 months,
and APRs up to 36%.
- Payday loans: Payday loans are typically small, short-term,
high-cost loans that are repaid in increments out of the borrower’s paycheck
until satisfied. The set payments come directly from the borrower’s checking
account. Since qualification is often income-based, they’re accessible to
borrowers with bad credit. Because of their high costs for short term loans, they’re usually considered
predatory, and some states prohibit them. Borrowers risk multiple
overdrafts if the full amount of each payment can’t be drafted from their
checking account each pay period. This often leads to overdraft fees, can cost
borrowers their checking account, and lead to collection both from the payday
lender and the borrowers bank.
- Car title loans: Car title loans are lump sum loans secured
loans where lenders use your vehicle’s title as collateral. You usually
must own your vehicle outright to use it
as security for a title loan. These loans often come with high APRs and short
terms which can make repayments more difficult. If you default, the lender can
repossess your vehicle.
How to Get a Loan with Bad Credit
Start with determining the bad credit loan companies where
you will qualify for a loan. Most companies post their eligibility requirements
online. Make a shortlist of lenders that may suit your needs. While each will
have a slightly different application process, here are the common steps you’ll
encounter:
- Visit each lender’s website: Visit the websites of the
lenders from your shortlist.
- Go through
pre-qualification: Most lenders pre-qualify with a soft credit
check on their site. This involves providing your monthly income and expenses, and other required income.
- Review your offers: Lenders review your application and let you know if you’re
approved. If you are, they’ll show you
how much you can borrow, along with the fees, APR, and terms. Compare
offers: Look at your offers side by side to see which loan fits your budget and
purposes most closely.
- Accept the loan: Follow the lenders process to accept the offer. You may have to verify
your income by sending bank statements or connecting your bank account and send
other documents related to monthly expenses or collateral offered to secure the
loan. Then, you’ll usually need to e-sign documents.
- Receive the funds: Upon full approval, the lender will send
you the funds. Often, they’ll direct deposit them into your bank account within
one to two business days.
Where Can I Get a Personal Loan with Bad Credit?
Borrowers with bad credit can get a personal loan from
banks, credit unions, and online lenders. In most cases, the best bad credit
loans are available through online lenders like the six lenders above.
specialize in lending to bad credit borrowers, have lower overhead costs because
most don’t have physical branches, and have more lenient loan qualification
requirements.
Alternatives to Bad Credit Loans
Even the best bad credit loans can be expensive, so consider
one of these alternatives:
- Borrow from friends and family: Lenders don’t know you
personally so can only look at your financial records and history to assess the
level of risk you present. Friends and family members know you, which can work
to your advantage when borrowing money. If you need better loan terms than you
can get with a lender, consider asking people who trust you to repay them for a
personal loan.
- Credit cards: Some lenders also offer credit cards to people
with bad credit. In some cases, you must put down a security deposit but then
can earn an unsecured credit line as you make faithful payments for a certain
amount of time. While credit cards typically have high APRs, you can cut your
borrowing costs by paying off the balance as quickly as possible.
- Work on your credit: If your financial need is not an emergency,
work on fixing your credit and wait. Get a secured credit card to establish a
positive credit line and make all your payments on time, and in a short time,
you may qualify for better rates and terms on a loan than you can get with
loans for bad credit.
Bad Credit Loans Rates, Amounts, and Terms
The best bad credit loans can offer a far better borrowing
solution than payday or car title lenders. You often can borrow thousands of
dollars which can be repaid over several years with APRs below 36%, in most
cases. While the loan amounts may be lower than personal loans for good credit,
they are often higher than payday loans and car title loans.
Additionally, the APRs usually are on the high end of the ranges lenders provide to
account for the risk you present. But they will be much lower than the APRs
you’ll face with payday loans and car title loans. Overall, bad credit personal
loans are worth considering, if they’re your only option. They also can work as
a tool for improving your credit, provided you make your payments on time, and
help you get loans with better rates and terms
in the future.
How to Avoid Personal Loan Scams
Scammers about in the personal industry, especially for
borrowers with bad credit. The best way to avoid scams is applying through a
reputable lender websites Here are some red flags that are warnings you’re on a
scammers website:
- Incorrect or unsecure URL: Scammers often create websites
that look very similar to a legitimate lender’s website to steal your
information. Check website URLs carefully to be sure you’re on the true
lender’s website and make sure they start with “https” and you see a lock
symbol at the beginning of the URL.
- Personal email address: If you receive an email from someone
pretending to represent a lender that uses a personal email address, especially
from a free email provider, be wary. Lender representatives use email addresses
that end with the company’s website URL (e.g. name@avant.com)
- No credit check: Lenders must run a credit check, even if
just a soft inquiry, to verify your identity. If a lender does not require any
credit check, stay away.
- Upfront payments: Most personal loans today require upfront
payments. Application and origination fees get deducted from your loan
proceeds. If a lender is trying to get you to pay something before you can get
your loan funded, that’s a big red flag.
Go to legitimate
lenders, like those that made our list above. By opting for well-known,
reputable lending companies, and going directly to their websites, you can
greatly reduce your risk of getting
scammed.
Conclusion
If you currently have bad credit and need a loan, there are
a number of lenders that will consider lending to you — no matter your credit
score. Above are six of the best loans for bad credit currently on the market.
Applying is simple and you can get an answer within minutes. The downside of
bad credit loans is you’ll likely get
smaller loan amounts with higher interest rates than if you had fair or better
credit. But, if you pay your loans on time, you’ll add positive credit activity
to your credit reports. That can help you improve your credit score and
position you for better rates and terms for your future borrowing needs.
