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Your Guide to Personal Loans for Bad Credit
25 Jan 2019

Your Guide to Personal Loans for Bad Credit: What They are and How They Can Help

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Your credit score is more than just a random number generated by a financial institution. It is a key piece of information used by everyone from your landlord to your local car dealership to determine your creditworthiness. Most lenders make things as easy as possible for those with high credit scores to obtain loans and other types of financing. However, there are personal loans for bad credit available, helping you achieve your financial goals regardless of your history.

What is Bad Credit?

While individual lenders typically have their own guidelines as to what certain credit scores translate to, most agree that bad credit is a score beneath 629, as rated by FICO and VantageScore, the two most popular ways people measure credit. Fair credit is generally considered to be anything between 620 and 689, scores between 690 and 719 are considered to be reflective of someone with good credit, while excellent credit is a score of 720 or above.

A report released by Fair Isaac Corp., the company that produces FICO scores, indicated that 20 percent of all Americans had a score beneath 600 in 2017. Medical bills, education costs, and unpaid credit cards are the biggest contributing factors to a person having a low credit score. It is a good idea to have a rough idea what your credit score. This lets you know if you have work to do to rebuild it, and also gives you an idea of what type of lender you should seek when you do require a loan or other type of financing.

How Can Bad Credit Impact Me?

Bad credit can affect almost every area of your life. For starters, it makes it very hard to get approved for any type of credit at all. If you do manage to get approved, bad credit can result in sky-high interest rates on credit cards and loans if you don’t shop around for financing specifically designed for bad credit.

Security deposits may increase or become implemented in order to obtain certain utilities like electricity and cable if you have bad credit. While these deposits are typically refunded at the end of the contract’s term, it can be difficult to come up with the deposit money to begin with. Apartments and good cell phone plans can also be harder to obtain, as credit checks are increasingly required as part of application processes.

While it is hard to deny the impact, bad credit can have on your life, there are things you can do to improve your rating. Looking into personal loans for bad credit and using that loan to consolidate any outstanding debt is a great way to start. Only being required to make one payment per month, with one interest rate to worry about, makes budgeting for repayment much easier. Most consumers find that they are able to pay off debt faster when it is consolidated, rather than spread out among several different lenders.

What are the Benefits of Getting Personal Loans for Bad Credit?

Aside from using personal loans for bad credit to pay off existing debt, there are a ton of other benefits to getting this type of financing. To start with, personal loans can be used for anything, without any restrictions, unlike car or student loans, which can only be used for specific purpose. This means you can spend the money however you see fit, giving you a lot more freedom and flexibility than you may otherwise have had. You should still think about the purpose of the loan before you borrow, to ensure that you spend the funds as you had intended and to help you determine the exact amount you need.

In general, a personal loan can come in whatever amount you need, depending on your income and the lender you choose to borrow from. Other types of loans often have minimum or maximum amounts. For example, payday loans are typically limited to a percentage of your weekly paycheck. Other lenders may have a minimum amount that you must borrow; which can be way more than you need. Over-borrowing can be a dangerous habit to get into, as you may be tempted to spend the extra funds without having a plan in place to recoup them. It is a much better idea to only borrow the precise amount you need.

Another advantage to taking out a personal loan is that the monthly payments are predictable. In most cases, they are going to be the same each month until the loan is gone. Borrowers can use this consistency to better budget out their monthly expenses, ensuring that there is enough in your account on the day your payment comes due.

How do Personal Loans Differ from Other Types of Loans?

Personal loans are only one form of financing available to most consumers. It is different from other common borrowing methods, like credit cards or mortgages, in a few ways. First, they are an unsecured loan, meaning that no collateral or security ever needs to be provided. Borrowers can also benefit from more flexible terms, especially when they work with an organization that has contacts with multiple lenders, like Bonsai Finance. Another key difference is that you do have the option to pay off your loan early. With other types of financing, borrowers are often hit with steep fees and penalties for early repayment. However, when you opt to look into personal loans for bad credit, you have the freedom to pay it off as soon as you want.

What to Look for in a Lender?

Before you sit down to fill out your loan application, take the time to jot down a few key notes, including:

  • What you want to use the loan for
  • How large the loan needs to be
  • When you think you can realistically pay it off
  • What interest rates are acceptable to you
  • How much you can reasonably afford to pay off each month

Having this information written down makes it easier to choose between different lenders when presented with an option. For example, if you want your loan to have a 12-month term, this makes it easy to dismiss lenders suggesting a term of six months.

At Bonsai Finance, we understand that having bad credit doesn’t make you a bad person. Bad credit can happen to almost any one. Something as minor as an unanticipated trip to the hospital is enough to negatively impact your rating. Our agents are never judgmental. Instead, we work with you to find the perfect lender, doing all we can to get you the funds you need, whatever your credit score happens to be. As you are shopping around for an institution to help facilitate your loan, consider giving Bonsai Finance a call to benefit from all our compassionate and skilled agents can do for you, including finding personal loans for bad credit.

How to Apply

When you work with Bonsai Finance, applying for your personal loan is easy, regardless of credit rating. All applications can be done online, whenever is convenient for you. We recommend that you have a few things handy before you start to speed up the process:

  • Proof of income
  • A piece of photo identification that includes both your address (to verify residency) and your age
  • Banking information, such as your account number, for deposit purposes

Once your application has been submitted, an agent typically gets in touch with you in a few days to let you know if you have been approved. Those who have are advised of the next steps they need to take to ensure the funds end up int heir account. When it comes time to make your first payment, the funds can come directly from your bank account, making things incredibly easy.


The best way to ensure that your personal loan doesn’t negatively impact your credit is to make your repayments on time, in full, each and every month. Lenders have to report late or incomplete payments to the credit bureau, which can cause an already bad credit score to drop even further if you aren’t making your payments.

Agents determine the amount of each monthly installment based on your income, making sure that reasonably make your repayments on time and in full. Making these payments on time is incredibly important, as it directly impacts your credit rating. Opting to have these installments automatically withdrawn from your account each month means that you don’t need to worry about forgetting to make a payment.

If you are looking for a way to consolidate your debt or finance your next major purchase, personal loans for bad credit may be exactly what you are looking for. Contact a Bonsai Finance representative to learn more about personal loans, how they work, and how they can work for you.

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