On the standard 300 to 850 credit score scale, anything under 601 is considered bad. Yet, nearly one-third of Americans have a credit score lower than 601.
If you are one of the millions of Americans who have bad credit, read on.
We’ll discuss what you need to know about loans with bad credit and where you can go to get one.
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Various Credit Score Requirements
There is no magic number that is the cutoff credit score that means you can’t get a bad credit loan.
Each lender will have their own rules for what they deem acceptable credit. When you have bad credit, it’s your job to do your research and find loan companies for bad credit.
It also depends on what kind of loan you are looking for. A mortgage loan is different than a personal loan.
Lenders may look at other factors besides your credit score. Your income to debt ratio and how your credit score has been improving over the past while can also help get you a loan.
And some lenders, such as payday lenders, may not even look at your credit score to approve you. Though the interest rates are typically much higher, payday loans are an option for people with bad credit.
Check out these 8 signs that you qualify for bad credit loans.
Do Bad Credit Loans Cost More?
Typically, yes. If you have bad credit, you will likely have to pay a higher interest rate.
That’s because personal loan no credit check lender considers you a higher risk. So, they will charge more interest in case you don’t pay off the full loan. They want to get as much of their money as they can, just in case.
Depending on the interest rate you are offered, you could end up spending thousands of extra dollars on interests.
Shop Around for the Best Rate
Yet, you can get lucky and get an installment loan with a fair interest rate if you do your research. Always ask lenders to pre-approve you or do a soft check. This won’t hurt your credit score and will let you know if you are approved.
Then you can compare the loans you are approved for and choose the one with the best interest rate.
Consider a Credit Union
Your local neighborhood credit union may be more willing to give you a loan than a traditional bank.
That’s because credit unions are not-for-profit organizations that exist to serve their members. In other words, they want to help out people in their community.
All you have to do is become a member of that credit union and ask for a loan.
Your Credit Score Can Improve
Remember, just because you have bad credit now, doesn’t mean it always will be this way. Late payments, foreclosures and other bad marks on your credit report will disappear after seven years. And, there are multiple ways you can improve your credit score in as short as 30 days.
As you habitually pay your bills on time and keep your credit cards under the max limit, you will rebuild your credit score.
Over time, your credit score will begin to improve and you will have a better chance of getting a loan from more lenders and with reasonable interest rates.
Bottom Line on Loans With Bad Credit
Thanks for reading. We hope this post has helped you understand how loans with bad credits work.
Remember, if you are prepared to do your research, you may find a lender that offers you a good loan at a decent interest rate.
Next, review these four tips for getting bad credit loans.