The Best Personal Loans if You Have Bad Credit

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Bad credit can be a major hamstring on your financial flexibility. Without a good credit score, it can be hard to take out new credit cards, secure financing for major purchases, or access high-quality loans with great interest rates and other benefits.

Luckily, your options aren’t totally truncated if you have bad credit. In fact, you can find reasonably good personal loans even with fair to subpar credit. In this article, we’ll take a look at the best personal loans out there specifically for those with bad credit. By knowing your options, you can avoid having to take out predatory loans with egregiously high interest rates.

The Best Personal Loans if You Have Bad Credit

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What Are Personal Loans for Bad Credit?

Personal loans for bad credit are exactly what they sound like: financing offers for individuals who have bad credit. Credit scores generally range from 300 to 850, although there are a few different credit score ranges that different lenders or organizations may use.

Regardless, credit scores are always critical tools that lenders and credit card companies use to determine your creditworthiness. While the exact score threshold varies from place to place, a FICO credit score of below 580 usually marks a borrower as having “bad credit.” It can be very difficult to acquire traditional financing or open high-quality credit accounts without a higher credit score.

But since you need to borrow money and pay it back to build up your credit score, it can be tough to rebuild your credit once it sinks to the “poor” range of the scale. What can you do?

Take out bad credit loans. Bad credit loans are financing offers designed for individuals with bad credit. They oftentimes will have relaxed application requirements or lower credit score thresholds. The best personal loans for bad credit also don’t have extremely high interest rates or unnecessary fees.

Types of Loans for Bad Credit

Loans for bad credit are available in many different types. The type of loan you take out can influence the loan’s terms and conditions, its repayment terms, what things you can spend the loan money on, etc.

Unsecured Loans

Unsecured loans are those not secured by collateral. These are typically offered by credit unions, online lenders, and banks. Repayment terms are usually between two and seven years, though this can vary heavily. They are also the most common loans available.

Secured Loans

Secured loans do require some form of collateral. Collateral is either property or money that you agree to give to the lender if you default on the loan. You can find lots of secured loans for bad credit since many lenders start with the assumption that a person with bad credit isn’t as trustworthy with borrowed funds as someone with amazing credit. But secured loans are also commonly used for mortgages, home equity loans, auto loans, and more.

Cash Advance Loans

Cash advance loans are usually offered by credit card issuers like banks and credit unions. These are short-term loans meant to give you a bit of extra cash before you get paid or otherwise come into money. However, note that cash advances are usually more expensive compared to unsecured or secured personal loans. You should try to avoid these outside of emergency situations.

Other Bad Credit Financing Options

Aside from standard loan types, you can pursue alternative means of financing with bad credit like:

  • Credit cards: These qualify you to borrow up to a certain credit limit. Then you have to pay back the credit you’ve spent with a minimum monthly payment.
  • Debt consolidation loans: Debt consolidation loans are top choices if you have multiple bills or loans eating through your finances. With a debt consolidation loan, you take out one new loan for a total of your outstanding debts, then use that money from that loan to pay off those debts. Afterward, you only have one loan and one interest rate to consider as you work down your total debt.

Are “Bad Credit Loans” Subpar to Other Loans?

Not necessarily, although they do usually include higher APRs (Annual Percentage Rates), potentially more fees, and possibly certain limitations. The better your credit is, the better loans you have access to whenever you’re in need of financing.

That doesn’t mean all bad credit loans are terrible or that you should never take them out. It just means you should compare bad credit loans carefully and only take out financing when appropriate.


When Is a Loan for Bad Credit Appropriate?

Personal loans for bad credit can be wise financial decisions in a variety of circumstances, including:

  • When you need to rebuild your credit. So-called “credit builder loans” (oftentimes secured loans) are perfect for this need. With the right credit builder loan, you can take out money, pay it back consistently, and build up your credit score over time
  • When you have an emergency expense and want to avoid predatory loans with high interest rates. Sometimes disaster strikes despite your preparations. A personal loan for bad credit can help you get out of a financial tight spot when you need it most
  • When the alternative is bankruptcy or other negative outcomes. A personal loan for bad credit can always be paid back eventually, provided you set up a payment plan and budget accordingly

In other words, loans for bad credit should be used just as responsibly and sparingly as loans if you have good credit. Bad credit loans can be very advantageous, but only if you use them when needed. If you use bad credit loans irresponsibly, you could damage your credit score over time and dig yourself into a deeper financial hole that’ll be even harder to climb out of.

How to Find the Best Personal Loans for Bad Credit

While each of the personal loans detailed above is a good choice if you have bad credit, it can be tough to know which is right for your unique needs. Here’s how you can compare different bad credit loans against each other to find the right financing offer.

Look at the Fees

First, consider whether a given personal loan for bad credit loan comes with excessive fees. Common fees for bad credit loans include:

  • Origination fees, which only apply when you first take out the loan
  • Annual fees, which apply on the anniversary of taking out the loan each year
  • Late fees, which only apply if you miss a payment

Fees are hard to avoid if you have to take out a loan with bad credit. But some loans have few or no fees, which might make them better choices compared to alternatives.

Consider the Repayment Terms

Next, consider the repayment term length for a given loan before signing on the proverbial dotted line. You can find personal loans with repayment terms of anywhere between several months and several years after taking them out.

Remember, the shorter the repayment terms are, the more money you have to pay back each month. But the longer a loan’s repayment term is, the more interest will apply to the loan’s balance and the more you’ll pay in total over time.

Look at the Loan Ranges

Bad credit loans can have ranges or limits of several hundred dollars or several thousand dollars depending on what you need. Again, consider your personal financing requirements and find a bad credit loan for enough money without including too many exorbitant fees or high APRs (see more below).

In many cases, the more money a loan provides you with, the longer it’ll take to pay back and the more you’ll have to pay in the long run, depending on the APR.

Know the APR Ranges

Naturally, a personal loan for bad credit is only appropriate if it includes an APR or interest rate that won’t bankrupt you in the process. Of course, even the best personal loan for bad credit will have a worse APR than a personal loan if you have fair or excellent credit. But the exact APR will vary from loan to loan.

Generally, you can expect APRs to range from as low as 7.5% to 29.99% or higher. Check out our detailed reviews of the above personal loans for bad credit and compare their APRs to see which is the best long-term choice for your needs and your budget.

Consider the Application Method and Speed of Funding

Lastly, consider how a bad credit loan wants you to apply for it and how quickly you can potentially get your funding. Many of the best bad credit loans allow you to apply completely online, then receive your financing in one to two business days. Such loans can be advantageous if you need financing fast to pay for an emergency expense, like your car breaking down the day before work.


Takeaway

As you can see, you have lots of options if you need financing fast but don’t have great credit to speak of. Be sure to review each of the above personal loans for bad credit and compare their factors carefully. That’s the best way to apply for and receive financing with terms that work for you instead of the other way around!

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