Sometimes life gets messy. If you’ve hit a rough patch and your credit has taken a nosedive, you might find it hard to get a loan when you need it the most. The good news is that there are loans for people with bad credit. You just need to know what to look for and what to watch out for.
Know Your Credit Score
Lenders judge you based on your credit score so it’s really important to know your score and understand it. When you apply for a loan, your FICO score determines if you should be approved for the loan or not. Check out sites like FreeCreditReport.com, CreditKarma.com or you can request it from your bank. FICO will provide it to you directly, but you have to pay $59.85 for your score from the three bureaus Experian, TransUnion, and Equifax or $19.95 for a score from only one credit bureau. Here are some tips for you if you are looking to quickly build up your credit score.
Scores are broken down into the following categories:
- 720-850 – Excellent Credit
- 680-719 – Good Credit
- 630-679 – Fair Credit
- 550-629 – Subprime Credit
- 300-549 – Poor Credit
People with a score of 720 or better typically receive much better rates personal loans. People with credit in the 550-629 range can pay up to 29%. People whose credit is poor will often be denied for loans from traditional lenders.
If you’ve got bad credit and need money, check out these 6 tips to get loans for people with bad credit.
Visit a Credit Union
Remember the small community banks of long ago? That’s what credit unions are like. Credit unions are nonprofit answers to people who have bad credit and need loans. They give their earnings to members of the union by charging lower fees and providing good customer service.
Credit unions usually place more emphasis on a person’s character and their promise to pay the loan back than on their credit score. You can typically find a credit union in your area that’s willing to work with you.
Get an Installment Loan for Bad Credit
Installment loans for bad credit are a good option for people who are confident in their ability to pay regularly via a U.S. bank account. Typically, you can get an online installment loan without a credit check so if you have bad or no credit you can get approved. You fill out an application form and the cash is deposited within the next business day.
You repay installment loans every two weeks or every month. Make your payments on time so you can minimize the interest paid while improving your credit score. You can get an installment loan from a small lender. Student loans and mortgages are also considered installment loans.
Borrow from Friends or Family
If you’ve got bad credit, borrowing from friends or family may be a good option. Be warned, though, that not repaying people close to you can cause serious disagreements and ruin relationships. That being said, taking out a “family loan” may be the right option, because you can agree on terms that are comfortable for both sides. Try to make the process as formal as possible by recording everything and having both parties sign an agreement.
Try Peer-to-Peer Lending
Peer-to-peer lending, which began in 2005, is a way to connect individuals willing to lend money to those who need it. Borrowers can create a listing on an online platform or peer-to-peer website and wait for an investor to choose to fund their request.
With this type of lending your credit score is still considered, but individual lenders have the discrepancy to determine if they want to loan you the money. Lending standards are usually more flexible and the APR is typically lower.
Apply for a Secured Loan, Home Equity Loan or Home Equity Line of Credit
A secured loan means that you offer up collateral, such as a car, boat or home, which the lender will hold in case you default on your loan. These loans usually have lower interest rates and provide you with access to larger sums of money. The amount you are able to borrow depends on how valuable the asset is that you’re using as collateral.
Your home is a great piece of collateral, but you run the risk of losing it if you default on the loan. You can look into getting a home equity loan or a Home Equity Line of Credit (HELOC). A HELOC is different than the lump sum of cash you’d get from a home equity loan. A HELOC is like a credit account meaning you borrow what you need and pay it back according to a schedule. Being disciplined pays off if you have a HELOC. Loan terms for home equity loans and HELOCs are usually up to 30 years.
To figure out how much equity your asset has, take the market value and then subtract however much you owe on it. If you have a house that’s worth $350,000 and you still owe $100,000, then your equity is $250,000. You can also use your savings account or stocks as collateral. Many people will advise that you use the money in stocks or savings to pay the debt you owe rather than taking out a loan.
Find a Co-Signer
Do you know anyone with good credit? You can ask that person to be a co-signer on your personal loan from a traditional lender. A qualified co-signer means the lender will set the loan terms based on that person’s credit score. That will get you a better APR than if you applied on your own. The co-signer is also equally obligated to pay back the debt so if you fail to pay it, that person needs to. All payments will be recorded on both of your credit reports, which is why it’s important to pay your co-signed loans on time, all the time.
Avoid Payday Loans
Avoid payday lenders who may have predatory practices and cause you to get even deeper into debt and unable to get out. Payday lenders will only loan you money at very high interest rates. Some of them have interest rates as high as 350%!
In fact, payday loans are illegal in 13 states because of their poor business practices. So when your credit is bad, you may feel like you’re at the mercy of payday lenders who will only loan you money if you agree to repay it at high, or “subprime,” interest rates. This just isn’t the case — there are other options.
Can I Get a Student Loan with Bad Credit?
Students with bad credit or no credit won’t have a problem getting federal student loans. This is because undergraduate students who are applying for federal loans can obtain a loan no matter what their credit score is. Graduate students with bad credit can also get federal student loans as long as their credit reports have no negative marks on them. Just remember that federal student loans generally have higher interest rates than private student loans, so you will want to pay them off fast.
Although federal student loans don’t require stellar credit, they may not cover all of your costs to attend school. This is where private student loans may come in and these do require good credit. If your credit isn’t great, you can apply for a private loan with a co-signer.
How to Apply for a Loan with Bad Credit
When applying for loans with bad credit you may get turned down frequently. Don’t be discouraged. Simply ask for an interview so you can explain your circumstances to the lender.
On the day of your interview be sure to bring documents like your tax returns, pay stubs, list of assets like your car, property or home, list of unsecured debts like credit cards, and your bank statements. You need to show that you can be responsible with your money and showing this documentation is one way to do so.
Understand Why You Have Bad Credit
After you know your score, do you understand how you got bad credit? Take a look at your finances and your spending habits. Some common signs of a bad credit score include the following:
- You have high-interest rates on credit cards and loans
- You make only the minimum payments on your credit cards
- You pay your bills late
- You overdraw your bank accounts
- You can’t secure a lease for housing
- You can’t get a cell phone contract
These behaviors will negatively impact your credit score. Take a hard look at your habits and what is contributing to your bad credit.
Bad credit doesn’t need to be permanent. It will make your life more difficult when you’re trying to get a loan, but you can take steps to improve it. Follow some tips to improve your credit like using 30% or less of your limits on your credit cards, paying on time every month, and paying
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
Sort By :
Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.