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- Best Personal Loans for Bad Credit
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When your credit is bad, you might find it difficult to qualify for a personal loan, especially one with a low interest rate. If you want to use that personal loan to consolidate high-interest debt and improve your credit score, it can feel like you're stuck in a catch-22 situation. And if you need an emergency loan, you may feel distressed or discouraged.
But you do have options, even if you have a bad credit score. Here, we show you some of the best personal loans for bad credit currently on the market.
A low credit score concerns lenders because they're afraid you will miss payments or abandon repayment altogether. That's why the interest rate charged for bad credit loans is higher (sometimes, considerably higher) than the interest rate charged for loans to people with good or excellent credit.
Once you apply for a loan, a lender will look at two primary things: Your credit score and your debt-to-income ratio (DTI).
These will determine whether or not you get loan approval, as well as what loan amounts and interest rates you qualify for.
Still, if you need a loan, the best personal loans for bad credit are far better options than, for example, a payday loan. Payday lenders can charge APRs of up to 400% and trap borrowers into vicious cycles. These predatory loans may be widely available, but they are such a dangerous financial proposition that many states prohibit or heavily regulate them. Keep this in mind as you compare lenders.
If you're applying for a personal loan for people with bad credit, you will pay a higher APR than individuals with higher credit scores. That's because the lender is taking on more risk by lending to you. But, if used responsibly, a personal loan from a reputable lender might help you to improve your financial situation in the long run.
Here are some of the advantages of taking out a bad credit loan.
Even if your personal credit score isn't perfect, you might benefit from a bad credit personal loan.
Before making a financial decision, it's essential to be aware of the disadvantages. Here are a few potential downfalls that can impact even the best personal loans for bad credit.
One of the most interesting things about personal finance products is that there is no one-size-fits-all solution. We need to scan the landscape to figure out what works best for us, and personal loans are no exception. Here are a few alternatives:
Personal savings account: Having poor credit does not necessarily mean that you can't put money away into an emergency fund, even if it's a little at a time. As irritating as it can be to be reminded of the importance of saving, the ability to take money from your savings account rather than take out a loan will almost always save you money. And if you don't need cash urgently, saving up is always a better option than taking on debt.
Cosigner: If you have someone in your life with strong credit, ask them to cosign your loan. A loan cosigned by someone with good or excellent credit will enjoy a better interest rate than one designed for a borrower with bad credit. Before asking someone to cosign, though, think long and hard. Remember that if you don't pay, the cosigner will be responsible for your debt. If there is any chance that you will not be able to keep up with your payments, you could be putting an important relationship in jeopardy.
When your credit improves, you may also be able to qualify for a balance transfer card. This would let you consolidate high-interest credit card debt onto a card with a 0% intro APR.
Life can get messy, and your credit score can take a hit -- despite your best efforts. If you urgently need money while you are in the process of rebuilding your credit, a poor credit personal loan might be a good option.
Deciding whether a personal loan for bad credit is right for you is a matter of being clear about your financial goals and whether that loan will help you meet them. For example, if you are consolidating debt, taking out a loan may help to make your payments more manageable. The best loans for bad credit will improve your life, not add more stress.
Weigh up whether you really need that money right now, or if it can wait until you've improved your credit. Then crunch the numbers using several different scenarios, including a personal loan, bearing in mind what you can afford each month and how much it will cost you overall.
Lending Partner | Min. Credit Score | Loan Amounts | APR Range | Best For |
---|---|---|---|---|
Upstart | 580 | $1K - $50K | 7.98% - 35.99% | Reducing high interest debt |
LendingPoint | 585 | $2k - $25k | 9.99 - 35.99% | Borrowers with poor credit scores |
FreedomPlus | 640 | $7.5k - $40k | 7.99% - 29.99% | Diverse offerings |
Avant | 580 | $2k - $35k | 9.95% - 35.99% | Borrowers with poor credit scores |
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