A Complete Beginners Guide to Finding the Best Personal Loans for Bad Credit Online

Filed in Loan by on November 7, 2020 0 Comments

This page provides detailed information on finding the best personal loans for bad credit online. Here, you will be guided through what personal loan is, what personal loan for bad credit is, what is considered bad credit, how to know what credit score range you are in, what interest rate to expect if you have bad credit, where to get a personal loan with bad credit, best personal loans for bad credit, requirements to access bad credit loans, and all other important information you may need to know. Please, stay tuned.

What Is a Personal Loan?

A personal loan is money you borrow from a bank, credit union, or online lender that you pay back in fixed monthly payments or in installments, usually over two to seven years. Lender rates can vary from 6% to 36% APR (Annual Percentage Rate).

With a personal loan, you can borrow money to cover the cost of home improvements, pay off medical bills or consolidate high-interest debt. In many cases, it’s possible to get a personal loan online for just about anything you want.

Types of Personal Loans?

There are basically two main types of personal loans:

1. Secured Personal Loans

This type of personal loan requires some type of collateral. If you get a loan from your bank, you might have to put a certain amount in a CD as security. Or, you might secure a personal loan with your car or some other asset. If you don’t make payments, the lender can take your collateral to offset what you owe.

2. Unsecured Personal Loans

One of the biggest benefits of getting an unsecured personal loan is that you aren’t risking an asset. If you can’t pay, the lender has little recourse beyond sending your account to collections or suing you to try to collect what it owes. You haven’t tied the debt to an asset, so there’s a little less risk to you.

However, because of this, lenders may require charger a higher interest rate or require a better credit score. Just remember, when you miss payments, it is reported to the credit bureau and can cause your credit score to decrease.

However, there are many lenders willing to provide unsecured personal loans at reasonable rates. Carefully consider which type is likely to best fit your needs.

“Before making a choice, you should compare rates from several lenders. The loan with the lowest annual interest rate is the least expensive and therefore usually the best option”.

Benefits of Getting a Personal Loan?

There are several personal loan benefits to consider when deciding if getting one is the right way for you. Flexibility is one of the great benefits of getting a personal loan, but there are other benefits as well.

1. Personal loans can be used for multiple purposes.

When you get a personal loan, it can be used for almost any personal expense. There are a few exceptions, but, for the most part, you can use the money how you want. Some of the ways you can use personal loans include, Debt consolidation, unexpected expenses, making a big purchase, paying for a wedding, going on vacation, buying a car, etc.

2. Personal loans tend to have lower rates and higher borrowing limits.

In many cases, it’s possible to get a personal loan for a larger amount than you might have available on your credit cards. Additionally, many personal loans can have rates that are lower than credit card rates, though this is not always the case.

3. A personal loan can help to improve your credit score.

Another benefit of getting a personal loan is the fact that it can improve your credit score. When you make your payments on time and pay the full amount required, you build your credit history.

4. Personal loans follow a predictable payment schedule.

The set payment schedule offered by personal loans can let you see exactly when you’ll be done paying off your debt, and it also allows you to see exactly how much interest you’ll pay.

What Is a Bad Credit Loan?

A bad credit loan is a financial solution for consumers who need help paying the bills, but have an unattractive credit score and poor credit history. 

Bad credit loans work in exactly the same way a personal loan does. Its money you borrow and pay back in fixed monthly installments, usually over the course of one year, but it could go three years. The loan can be used for just about anything, including consolidating credit card debt, paying off medical bills, buying a car or even making a major repair to your own car.

What Is Considered Bad Credit?

The credit scores used by most lenders range from 300–850. If you have a FICO score under 670, you are considered a subprime borrower with a “fair” credit rating, according to Experian. The credit reporting company classifies a FICO score of less than 580 as “very poor.”

It’s important to understand that taking out a personal loan with bad credit can be quite expensive. Interest rates can often climb into the upper-30% range, based on your credit rating. Other obstacles you could face when you try to borrow with bad credit include lower loan amounts and shorter repayment terms.

To help you compare the best loan options available, we’ve researched more than a dozen personal loans for bad credit. We compared interest rates, fees, qualification requirements, and other loan features.

How to Know What Credit Score Range You Are In?

  1. Excellent Credit: 800 – 850
  2. Very Good Credit: 740 – 799
  3. Good Credit: 670 – 739
  4. Fair Credit: 580 – 669
  5. Poor Credit: under 580

What Interest Rate to Expect If You Have Bad Credit?

As a reminder, when you have a FICO score under 670, you are considered a subprime borrower. If your FICO score is less than 580, your credit falls into the “very poor” range.

Every lender sets its own criteria (including credit score thresholds) for loan approval and pricing. That makes it difficult to predict precisely what APR you’ll be offered for a personal loan if you have bad credit. Interest rates on personal loans can range from roughly 5.5% to 36%. If your credit rating is poor, you should expect to be offered rates on the higher end of that scale.

You may also come across lenders who promise “guaranteed approval” or “no credit check” for bad credit personal loans. Promises like these should be a red flag. Legitimate lenders never make these guarantees, according to the Federal Trade Commission, or even say you’re likely to qualify for a loan before you apply.

RELATED: A Complete Beginners Guide to Finding the Best Personal Loans Online

Where to Get a Personal Loan for Bad Credit?

Getting a personal loan with bad credit can be a challenge. However, you can find several lenders willing to do business with you albeit usually with a higher interest rate. If you are looking for personal loan options with a bad credit history, there are two main sources that you can consider.

Online Personal Loans for Bad Credit

Online lending networks take your loan application and connect you with lenders who may be willing to approve you for a personal loan. Often, you can submit one initial form and compare offers from multiple lenders.

Direct Lenders for Bad Credit Personal Loans

Direct personal loans come straight from the financial institution where you’re approved. These may include local banks and credit unions, online banks, and online direct lenders. If you have bad credit, it’s generally best to apply only with direct lenders that are willing to do business with credit-challenged borrowers.

Just because you have bad credit doesn’t mean you need to turn to a predatory payday lender when emergency expenses arise. Even with credit problems, you should still compare all of your available options because a more affordable solution may be available.

How to Choose the Best Personal Loans for Bad Credit Online?

Before you apply for a personal loan online, make sure you understand what you want in a personal loan as well as how much you really need because each lender has distinct terms and conditions.

“Consumers can choose the best personal loan by doing their research, shopping around between multiple lenders, reading the fine print and only selecting a loan that they know they can afford to repay,” says Jared Kaplan, CEO of OppLoans, an online lender for bad credit loans.

An easy place to begin is to check that a lender is licensed in your state. Make sure each lender can offer personal loans where you live.

How to Compare Personal Loans?

Try to compare loan rates from at least two personal lenders before you apply for a loan. Consider interest rates, credit requirements, loan amounts, repayment terms and other factors to choose the best personal loan for your financial situation. Take a look at this example comparing these two personal loan companies:

Discover

Personal loan interest rate: 6.99% to 24.99%

Minimum score: None

Loan amounts: $2,500 to $35,000

Term length: 36 to 84 months

Best feature: charges minimal fees

Avant

Personal loan interest rate: 9.95%–35.99%

Minimum FICO score: 600

Loan amounts: $2,000 to $35,000

Term length: 24 to 60 months

Best feature: accepts borrowers with low credit scores

When you’re comparing personal loan options, think about what works best for your needs. For example, if you need a large personal loan and have good credit, SoFi could offer a lower rate and larger loan amount than Discover. But if you need a smaller loan and have fair credit, Discover may be a better choice.

Of course, you shouldn’t choose a personal loan company based on interest rate alone. You’ll need to get rate quotes to estimate your personal loan rate because it depends on your credit and other factors.

Best Personal Loans for Bad Credit Online

Personal loan options can be more limited when your credit is not in good shape, but that doesn’t mean you don’t have options. There are lenders who may be willing to lend you a personal loan even if your credit rating is poor.

Avant: Best Online Loan

Avant offers the best overall personal loan to borrowers with credit challenges. If you qualify for funding, you could receive up to $35,000. Interest rates start as low as 9.95%. Although Avant charges an administrative fee, the maximum amount it charges (4.75%) is lower than what you may see from other comparable lenders.

Other important information:

  1. Minimum/maximum amount you can borrow: $2,000 to $35,000
  2. APR range: 9.95%–35.99%
  3. Fees: Avant may charge an administrative fee up to 4.75% that comes directly out of your loan. The lender charges late fees and dishonored payment fees as well.
  4. Recommended minimum credit score: 600
  5. Other qualification requirements: Besides checking your credit score, Avant will review your income to see if you qualify for a loan and how much you can borrow.
  6. Repayment terms: 24 to 60 months
  7. Time to receive funds: Loan funds may be deposited in your account as soon as the next business day.

First Tech Federal Credit Union: Best Maximum Loan Amount

Founded in 1952, First Tech Federal Credit Union is geared towards major technology-geared companies (though anyone can join the Financial Fitness Association for $8). Interest rates start as low as 7.70% and they offer personal loans up to $50,000.

Other important information:

  1. Minimum/maximum amount you can borrow: $500 to $50,000
  2. APR range: 7.70% – 18%
  3. Fees: None
  4. Recommended minimum credit score: Reported to be 600, but not stated on website
  5. Other qualification requirements: You should be at least the age of majority in your state, a U.S. citizen or living in the U.S. with a valid visa, have a valid email address and have a verifiable bank account.
  6. Repayment terms: Choose between 24 and 84 months (two or seven years).
  7. Time to receive funds: As soon as the same business day.

Navy Federal Credit Union: Best for Small Loans and Veterans

This credit union offers some of the best rates for those with less than stellar credit and one of the only financial institutions that offer such a low loan amount — starting at $250. Terms start at 6 months and you can secure a co-signer to help you qualify for a better rate.

To be eligible for membership, you need to have ties to the Department of Defense, the armed forces, or the National Guard. Otherwise, you’ll need to be a veteran or have an immediate family member who has a Navy Federal membership.

Other important information:

  1. Minimum/maximum amount you can borrow: $250 to $50,000
  2. APR range: 7.49% – 18%
  3. Fees: None
  4. Recommended minimum credit score: 580
  5. Other qualification requirements: Need to be an existing Navy Federal member
  6. Repayment terms: Choose between 6 and 60 months
  7. Time to receive funds: As soon as the same business day

LendingPoint: Best Post-Bankruptcy Personal Loan

Qualifying for a personal loan can be especially tricky if you’ve filed bankruptcy in the past. But if your bankruptcy has been discharged for at least 12 months, LendingPoint might be willing to work with you.

LendingPoint offers loans to borrowers in 49 states and Washington, DC with credit scores as low at 585. Qualified applicants can borrow up to $25,000 and interest rates start at 9.99% up to 35.99%.

Other important information:

  1. Minimum/maximum amount you can borrow: $2,000 to $25,000
  2. APR range: 9.99%–35.99%
  3. Fees: LendingPoint charges origination fees as high as 6%.
  4. Recommended minimum credit score: 585
  5. Other qualification requirements: You should be 18 years or older, provide a state or federal ID and Social Security number, and have a bank account in your name. You also need a minimum annual income of $20,000.
  6. Repayment terms: 24 to 48 months
  7. Time to receive funds: Once you’re approved, you can receive funds as soon as the next business day.
  8. Restrictions: If you live in the state of West Virginia you cannot receive a loan through LendingPoint.

Discover: Best for Flexible Repayment Terms

Discover loans are incredibly great if you want a long repayment period, as Discover’s payoff timelines start at 36 months and go as long as 84 months. Plus, Discover’s personal loan APRs can be as low as 6.99%, which makes them useful for people who want to consolidate existing debt at a low cost.

Other important information:

  1. Minimum/maximum amount you can borrow: $2,500 to $35,000
  2. APR range: 6.99% to 24.99% APR
  3. Fees: The Company offers competitive interest rates and doesn’t charge origination fees.
  4. Recommended Minimum Credit Score: No minimum
  5. Other qualification requirements: Besides checking your credit score, Discover personal loan review provides important details, so you can decide if the lender is a good fit for your borrowing needs.
  6. Repayment terms: 36 to 84 months
  7. To qualify, you must be at least 18 years old, a U.S. citizen or permanent resident, and have a minimum annual income of $25,000.

OneMain Financial: Best In-Person Loan Experience

If you prefer to do business with a lender face-to-face, OneMain Financial may be a good fit. The lender has almost 1,600 branches in 44 states where it offers unsecured personal loans to borrowers with less-than-perfect credit. Interest rates start at 18% and qualified applicants may be able to borrow up to $20,000.

Other important information:

  1. Minimum/maximum amount you can borrow: $1,500 to $20,000
  2. APR range: 18%–35.99%
  3. Fees: Origination fees can be a flat fee from $25 to $400 or 1% to 10% of your loan amount, depending upon your state of residence. Late fees also vary by state and can be as high as $30 per late payment or 15% of the size of your monthly payment.
  4. Recommended minimum credit score: 580
  5. Other qualification requirements: OneMain Financial will consider the following when you apply for a loan: your credit history, income, debts, and any collateral you wish to provide. 
  6. Repayment terms: The term length maybe 24, 36, 48, or 60 months.
  7. Time to receive funds: You could receive your funds the same day you’re approved if you opt to pick them up in person. Direct deposit may take one to two business days.
  8. Restrictions: If you’re pre-qualified for a personal loan with OneMain Financial, you’ll need to visit a branch and meet with a loan specialist in-person to complete the application process.

PenFed Credit Union: Best Credit Union

Technically a credit union, anyone can join if they join National Military Family Organization or the Voices for America’s Troops for $17 each. In addition to a myriad of banking products and services, PenFed Credit Union also offers personal loans for members who have a minimum credit score of 580. Plus, rates are competitive, starting at 6.49%.

Other important information:

  1. Minimum/maximum amount you can borrow: $500 to $20,000
  2. APR range: 6.49%–17.99%
  3. Fees: None
  4. Recommended minimum credit score: 580
  5. Other qualification requirements: PenFed will consider your credit history, income and debts when applying for a loan, plus your co-borrower if applicable.
  6. Repayment terms: Term length may be from 6 to 60 months.
  7. Time to receive funds: As soon as the next business day
  8. Restrictions: You need to become a member of the credit union in order to get a personal loan.

Rocket Loans: Best for Fast Funding

Rocket Loans is part of the Quicken family of companies and now offers same day funding for their personal loans. Applicants can check their initial rate without affecting their credit score and the ability to receive a rate discount by signing up for autopay.

Other important information:

  1. Maximum/minimum amount you can borrow: $2,000 to $45,000
  2. APR range: 7.161%–29.99% with autopay
  3. Fees: Borrowers need to pay an origination of 1%–6% origination fee that’s deducted from your final loan amount; $15 late fee
  4. Minimum recommended credit score: 580
  5. Other qualification requirements: Applicants need to be the age of majority in their state and a U.S. citizen or permanent resident.
  6. Repayment terms: 36 to 60 months
  7. Time to receive funds: Can be as soon as the same business day
  8. Restrictions: Individual applications only

LendingClub: Best Peer-to-Peer Lending

LendingClub is one of the most reputable peer-to-peer lending companies, helping to facilitate more than $55 billion in personal loans since 2007. The lender offers a pre-qualification option for applicants to check their rates without affecting their credit score, which starts at 10.68%.

Other important information:

  1. Maximum/minimum amount you can borrow: $1,000 to $40,000
  2. APR range: 10.68%–35.89%
  3. Fees: 1% to 6% origination fee; $15 late fee or 5% of unpaid balance (whichever amount is more)
  4. Minimum recommended credit score: 580
  5. Other qualification requirements:
  6. Repayment terms: 36 to 60 months
  7. Time to receive funds: Up to 10 business days depending on form of payment
  8. Restrictions: Loans not available for U.S. territories and Iowa residents

Upgrade: Best Personal Loan with a Co-signer

Headquartered in San Francisco and founded in 2017, Upgrade offers those with bad credit the ability to take out a personal loan with a co-signer. Many other lenders that allow co-signers tend to have membership requirements or higher rates. Upgrade allows applicants to borrow up to $35,000 starting at a rate of 7.99%.

Other important information:

  1. Maximum/minimum amount you can borrow: $1,000 to $35,000
  2. APR range: 7.99%–35.97% with autopay discount
  3. Fees: 1.5% to 6% origination fee; $10 late fee
  4. Minimum recommended credit score: 580
  5. Other qualification requirements: The applicant’s credit history and debt-to-income ratio may be taken into consideration
  6. Repayment terms: 36 to 60 months
  7. Time to receive funds: Applicants may receive their loan proceeds as quickly as the business day
  8. Restrictions: To receive the lowest rates, borrowers need to sign up for autopay

Your Local Credit Union: Best Payday Alternative Loan (PAL)

If you’re suffering with severe credit problems and need a small-dollar loan to get you through an unexpected financial emergency, a payday alternative loan (PAL) is worth considering. PALs are issued by some federally insured credit unions. You can locate a credit union near you at MyCreditUnion.gov.

The maximum amount you can borrow with a PAL is currently just $1,000. But the interest rate is capped at 28%, making PALs a more affordable option than payday loans and even some online personal loans for bad credit.

Other important information:

  1. Minimum/maximum amount you can borrow: Up to $1,000
  2. APR range: 28% (current maximum)
  3. Fees: Application fee cannot be more than $20
  4. Recommended minimum credit score: No credit check required with many credit unions
  5. Other qualification requirements: Requirements vary from lender to lender, but may include direct deposit participation, on-time payment history with other loans from the credit union, and verification of employment.
  6. Repayment terms: 1 to 12 months
  7. Restrictions: You should check with your individual credit union to see if PALs are available and if any restrictions apply

How to Get a Personal Loan with Bad Credit?

Unless it is an emergency, the first step to getting a loan with bad credit is to improve your credit score so you can afford the loan you need.

Start with timely payments, especially for credit cards; and reduce the balance on cards up to 30% of the allowed credit limit. Finally, don’t apply for a new loan.

The combination of these three factors (timely payment; low credit utilization; no new loan applications) makes up 75% of your credit rating. It won’t be unrealistic to think that by making efforts in these three areas, you can increase your result by 100 points in just 3-6 months.

If, however, this is an emergency and your application for a loan has been turned down repeatedly due to poor credit or no credit, it might help to ask a bank or credit union loan officer for an in-person interview to convince them you are creditworthy.

If you get that interview, be sure you are prepared with documents that prove you’re a good risk. Lending institutions love stability. It definitely helps your case if you can show them that you’ve lived in the same house (or city) and worked the same job (preferably for the same employer) for several years.

Frequently Asked Questions about Bad Credit Loans

Are Bad Credit Loans Safe?

If you take out a loan from a well-established source – check online reviews and length of time on the business – bad credit loans should be safe. However, with more companies offering their services to bad loan customers, every consumer must be careful not to get scammed. This often happens when you are required to make an advance payment (usually via wire transfer) in order for them to initiate the paperwork process. Never send company upfront money. Be very careful taking loans from a buying agency here, and pay here. Never give a company a Social Security number or bank account number unless you have received written documents about the loan.

What Type of Loans Can I Consolidate?

Any unsecured debt, which includes credit cards, medical bills or student loans. It would be great if American consumers had an emergency fund to dip into when they run into financial trouble, but that is not the case. A 2017 survey said that 60% of Americans don’t have enough savings to cover a $500 emergency expense. If your car breaks down or plumbing springs a leak or you make a visit to a hospital, you may need help paying what you owe and a bad credit loan could be the answer. However, you should do research and get quotes from at least 3-4 lenders so you can compare rates and terms to be sure you’re getting a good deal.

Are Bad Credit Loans Good for Emergency Situations?

It’s possible, but you likely would have to visit a peer-to-peer loan site where regulations are far more lax to find one. If you get an offer, expect to pay a very high interest rate. Handing a loan to someone with no credit history or co-signer is a roll of the dice for the lender. They will want a big reward for taking that risk.

Do I Need Collateral to Get a Bad Credit Loan?

No, but it certainly helps. If you have a steady income source and living situation, you can qualify for a bad credit loan. However, your interest rate will drop, possibly dramatically, if you have equity in a house or even a valuable car. Collateral always is a plus in a borrowing situation.

Can You Get a Loan If You Are Unemployed?

Theoretically, that’s possible, just not very likely. Maybe if you have some really good collateral and/or someone with tremendous credit willing to co-sign a loan with you, it could happen. Other possible sources of income – pensions, unemployment benefits, freelance work or investment income might get you a small loan, but having a job and predictable income is the best way to qualify for any loan.

How will Applying for The Loan Affect My Credit Score?

Applying for a loan is a “hard” inquiry on your credit report and that means a slight dip in your score. However, it’s a temporary dip and could be cleaned up in 3-6 months. If, however, you receive a loan and don’t pay it back on time, there will be some serious damage to your credit report for a long time. In other words, applying won’t hurt much, but not repaying on time, will cause you problems.

Conclusion

Before applying for a loan, make sure you understand what you are spending your money on and how much you really need. Try not to borrow more than you can repay, and make sure you can handle monthly payments along with your other obligations.

Remember to compare lenders to find the best personal loan for you. Look at several lenders and compare interest rates, origination fees, and other terms. Take a close look at the situation so you can choose the loan that will work best for you.

Do you have any queries on finding the best personal loans for bad credit online? Please feel free to let us know so we can assist you with any information you will need.

We hope you will find this information useful. Please, do not hesitate to share it with friends, colleagues and relatives whom you know may be in need of this kind of information. Thanks for caring and do have a nice one ahead!

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