Good NestingYou may have heard the phrase “bad credit” before, but never knew exactly what it meant. Bad credit is a label given to borrowers with FICO credit scores between 550 and 629. What could put you in the bad credit range? Failing to pay your creditors on time or missing payments altogether. And while that shows that you’re a riskier borrower, some lenders may still be willing to work with you via personal loans.
What is a personal loan? It’s a loan that is usually unsecured, can be applied for online, has fast funding (sometimes on the same day), and can be paid back in two to seven years, depending on the lender. And if you pay your personal loan back on time, you can also build your credit score, which is another benefit. What’s the downside to personal loans, especially if you have bad credit? Lenders will usually charge you higher interest rates since they’re absorbing more risk.
Personal loans can have interest rates that go up to 36 percent, a high number, but one that you may be willing to deal with if you need cash now. And as for how much cash you can get, some personal loans go up to $50,000, making them sufficient for covering significant expenses or emergencies.
Picking The Right Bad Credit Loan For Your Needs
When shopping for a bad credit personal loan, you will need to compare several factors to find the right fit. First, you need to look at the interest rate. While personal loans typically top out at 36 percent, they can sometimes exceed that number. This is why you want a lender that caps its rates at 36 percent.
Second, you want a lender that offers prequalification. With this feature, you can see what type of personal loan you qualify for without a hard credit pull that lowers your score. Without prequalification, you will have a harder time shopping for the best rate and lower your score via hard credit pulls.
Third, does the lender offer fast funding? This may be necessary if you need cash now for an emergency. Luckily, some lenders fund personal loans the same day you are approved.
Fourth, what about the application process? You want it to be as simple as possible, and many lenders offer online applications and lending decisions within minutes.
Fifth, you want to ensure the lender reports your payments to credit bureaus. Doing so can build your credit score, provided you pay on time.
And lastly, picking the right bad credit loan involves knowing where to look. Not all lenders work with bad credit borrowers, so you should start with your bank or credit union. Members of banks or credit unions can sometimes get personal loans as a loyalty perk despite bad credit. If that is not an option, try online bad credit lenders like LendingClub, OneMain Financial, Upstart, Upgrade, Universal Credit, and Seed.
