Personal loan on bad credit score
- If a borrower has a bad credit score, one that’s below 630, then the borrower shouldn’t be worried about the fact that he would not get a personal loan because some of the online lenders cater specifically to people whose credit history isn’t impeccable.
- These companies generally take into account the credit scores and history when they have to decide whether they should loan the borrower money, but they also have more flexible requirements than the banks do.
- While personal loans from the reputable online lenders are considered as good options for many borrowers, many online lenders recommend the borrower’s first visit to the local credit union when they are shopping for loans.
- Most of the credit unions offer flexible loan terms and also lower interest rates than online lenders, especially for people with bad credit.
- The maximum annual percentage rate at a credit union is considered to be 18%.
Compare offer from multiple lenders
- If one can’t get a loan through the local credit union, then the borrower should compare offers from the multiple lenders before signing any of the loan agreements.
- Rates for bad credit borrowers can vary dramatically depending on the lender’s underwriting requirements.
- Pre-qualification generally does not affect the personal loan credit score.
A borrower with a bad credit score
- Generally, the Borrowers with bad or fair credit scores missed payments or high balances on the credit cards. Would pay more for any personal loan than those with good or excellent scores.
- One may also be required have to consider options like
- Securing the loan with collateral, or
- Having a co-signer with good credit.
- But even the highest rate from the online lenders, typically which is 36% APR, is lower than what the borrower would pay for a payday loan, where rates are typically 400% APR.
- Also, some of the options which are available to the borrower when they do not get a personal loan with bad credit are
Debt Consolidation Loans
- If a borrower is having trouble in keeping up with multiple payments for debts like
- Medical bills, or
- Balances on high-interest credit cards, then he should consider debt consolidation loans.
- This type of personal loan rolls the debts into a single loan ideally with a lower interest rate. It saves money in the long run. However, you can check personal loan details.
Secured Personal loans
- If the credit score prevents the borrower from qualifying for an unsecured loan.
- Some lenders may offer the borrower a secured loan.
- Cars and certificates of deposits are the most common types of collateral the borrower uses to secure a personal loan.
- There are some of the online lenders that specialize in bad credit loans to help the consumers consolidate debt.
- By consolidating credit card debt with a personal loan, one would likely see an increase in the credit score.