Personal loans are among the quickest growing customer debt category. In 2018, the personal loan balances stood at $120 billion. Those figures might have increased since then.
When it comes to borrowing, anyone can find themselves in a tricky situation. Creditors will dig deep into your borrowing history and then make a decision based on what they find there. Lenders do the digging because they need to understand the exact risk of lending you the money.
If you have bad credit, you might miss the chance to get a personal loan approved.
You don’t need to panic though. If bad credit has ever stopped you from acquiring a loan, or you are worried that it might do just that, then keep reading because we have just the solutions for you.
First things first, here are some things so that you need to understand if you are new to this personal loan thing.
What Is a Personal Loan?
A personal loan is just another type of loan. Therefore, the word personal shouldn’t confuse you that much. This loan is unsecured and it typically ranges from $1,000 to around $100,000.
The amount is given to individuals with variable or fixed interest rates, which are useful in making large purchases or consolidating debt.
As a borrower, you can choose to take a personal loan for credit card debt consolidation, medical bills, home improvements, and many more key life expenses.
Personal loans have become famous because of their ease of access, through many online lenders, and technology. Technology has fueled the growth of personal loans.
Regrettably, if you have bad credit, you may face challenges in trying to secure a loan and even when you end up getting one, you might find yourself paying high interest. You might qualify for a loan with bad credit, but end up paying too much for it.
Do You Have Bad Credit?
You are probably wondering, what’s so bad about bad credit? Whenever you apply for a personal loan, most of the lenders investigate your credit scores. You are most probably going to have a couple of scores that vary for a number of reasons.
- Credit-reporting organizations may have varying data about you
- Different lenders may generate scores at different times (that means that the information retrieved may vary depending on the date of retrieval)
- Different lending companies apply different scoring models
Credit scores mostly range from 300 – 850 and anything that falls under the midrange category or lower than 300 makes it hard for you to qualify for a personal loan especially if you are looking to get one from a big bank or any other traditional lender.
Note that, if your credit history is nil or very little, you may have no scores at all. Additionally, if your credit reports are filled with negative information, you might end up scoring too little. Some things that can negatively affect your credit scores include paying bills late, maxing out your credit cards, and having civil judgments against you.
Bad credit should however not scare you, because there are many opportunities out there for people with bad credit to get personal loans. Some of them might have high-interest rates, so you need to be extra careful about who/where you get your loan from so that you don’t add to your financial issues.
How to Get a Personal Loan with Bad Credit
Whether you have good credit or not, you are prone to financial emergencies. It may be difficult to get a credit card with bad credit. Don’t lose hope if your credit score is lower than you’d like it to be. Here are 3 simple ways for you to get a personal loan with bad credit.
1. Online Lenders
Online lenders present you with two options, which are; Online “Installment” loans for emergencies and Online “Short-Term” Loans for emergencies. If the amount you need for your emergency is a four-figure, then you most likely need to take an installment loan.
The loan is obtainable in amounts of $2,500 up to $35,000 and that all depends on your credit profile.
After you apply for the loan, the period it takes for you to receive the money will depend on the lender you have approached and your personal financial situation. Look through the online marketplace and find an institution that offers you the opportunity to take a personal loan with bad credit.
There you can get loans of up to $2,500 in as little as 24 hours. Fill in the forms and submit it then wait. The best part about installment loans is that you repay them through regular payment throughout the entire loan term.
These type of loans are also affordable than other types of loans.
Therefore, if you are on the final stages of setting up a business and then you realize that the money you have is not enough. Maybe you want to pay rent for the premise and the property owner won’t let you breathe. You think about your options and then remember that you have bad credit. Now you are almost letting the premise go.
Well, such an online lender got you covered. Just visit the site and fill in the necessary information. The best part is that you will receive the funds directly into your bank account and you can use the money immediately. The business will be up and running on the same day.
On the other hand, you can take a short-term loan in instances when your credit scores cannot allow you to get access to an installment loan. Unlike installment loans, you will have to repay a short-term loan in a lump sum, which means that you will have to repay both the principal and interest at once. Compare your options before taking a short-term loan online, because these loans tend to have high Annual Percentage Rates (APRs).
These platforms have a large network of lenders and your bad credit is very much welcome. You also stand a chance of having your loan approved in just minutes and receiving the funds as soon as the following business day.
The only unique requirement here is that you must at least earn $1000 or more per month, and you must have been working in your current job for at least 90 days. That sounds fair, right?
If you need more information, you can read more on online lenders on the internet. There is a lot to learn here. Rather than risk your bad credit getting worse, ensure you have exhausted all other means of access to funds before choosing a loan.
Make sure you have contingencies in place to help you pay the loan. Carry out more research, and ask for advice even from the experts if you need to. Make sure you make a wise decision, you already have bad credit, and you do not want to add to your financial problems, do you?
2. Credit Unions
If you are a borrower with bad credit, then joining a credit union could save you big time. Credit unions are like banks. Unlike banks, when you apply for a loan here, you are not evaluated entirely based on your credit score.
The trick here, however, is that you first need to become a member. Therefore, you first need to convince them to grant you membership in the union. Before you are allowed to become a member of a credit union, your financial health will be checked.
They will then decide based on things such as where you reside and where you work.
If you can, join one which is affiliated with your employer (that’s if you are employed), or one which is community-based if you are self-employed and need personal loans. The best part about a credit union personal loan is the interest rate that can apply to anyone. For example, a credit union loan can have an interest rate of 18% and the same loan could have an interest rate of 36% in a bank. Interest rates affect your payout on a bad credit loan.
You can save a lot when you enroll in a credit union so you should consider joining one if you have bad credit.
Many credit unions are searching for individuals to take loans with them. As long as you can meet the terms that go hand in hand with your credit history, then you can find a credit union ready to work with you.
You can search for credit unions near you on the internet, and you can ask the experts for advice. Be vigilant when joining a credit union because there are many scammers out there waiting for needy people to swindle.
3. Friends and Relatives
If you look at this option from a relationship point of view, then it is a very dangerous option. However, in this case, you need to look at this from a financial standpoint. You are in need of a loan and your bad credit will not let you get one.
Borrowing from friends and family is easier and it does not involve too many terms.
Friends and family will not put you through a grueling process of determining whether you qualify for a loan or not. Of course, some might ask you questions, but you don’t have to worry about your credit scores being investigated.
When you approach a friend or a family member, you will also not pay high interest on the loan. The most important thing to keep in mind, however, before you take a loan from a friend or a family member, is what could happen if you fail to pay back the loan.
Money is a funny thing, especially when it passes from one family member to the other or between friends. When you are the one borrowing, you stand a lot to lose if you default. Loans taken from family and friends stand at around $89 billion every year in America.
Many take a loan from friends or family to buy a home or to set up a business.
Important Considerations When Taking Loans from Family and Friends
Just like any other loan contract, you as a borrower, have a duty to repay any loan you take from a friend or relative. If you fail to pay your loan, the lender can take legal action against you, despite the fact that he or she is a loved one. As long as there is a contract to prove the loaning transaction took place, you can be sued in a small claims court.
Apart from legal action being taken against you, not repaying such a loan can poison the relationship in ways that go beyond just a bad credit score.
Therefore, you have to treat any loan you take from a friend or a relative as an important business transaction. Assuming that it is a transaction you made with a stranger, would you default? Formalize the transaction with proper documentation and record it legally.
If you want to avoid future problems, make sure you have a written contract, which includes all the loan terms and the interest rate agreed on. Also, include in the contract what will happen in case you do not pay back the loan. Do not ruin a beautiful friendship or mess up your relationship with your relative because of money.
Don’t Let Bad Credit Prevent You from Getting That Personal Loan You so Need
Bad credit scores are a bummer and many creditors will not let you borrow their money if you have bad credit. But who said that you can only get a personal loan from a bank or the other traditional lenders who take too seriously bad credit?
Fortunately, even with bad credit; you can still get a personal loan. Join a credit union, visit online lenders or take that step and borrow from a friend or family member. Bad credit got nothing on you now that you have this information.
Contact us today, if you would like us to connect you with a loan offer or you have any questions about personal finance.