We can’t lie to you: getting a bad credit personal loan is harder than ever today. So many of us have been living on credit for so long, that when a real emergency or need arises, we don’t have the credit scores to get a loan for the money we need to help us through.
When you’re in the position of having to get a personal loan, but you have bad credit, there are a couple scenarios:
One, you may not be able to get a loan from a lender. Having bad credit today means many banks won’t touch you as a customer. The best thing to do is focus – hard – on fixing your credit ASAP.
Two, you may be able to get the bad credit loan, but the costs will be high, if not outrageous.
Is it possible to get a loan if you have bad credit? Bad credit personal loans as well as bad credit car loans are out there. Lenders know that with so many Americans who have poor credit or bad credit, there is a market for higher-risk loan products.
The question you’ll need to answer is, do you need an unsecured loan, or a secured loan? If you want cash without giving anything for collateral, your loan is unsecured. An unsecured bad credit loan is going to be the hardest to get. Banks just don’t want to take a chance.
If you are looking for a secured loan, say, a bad credit car loan or a loan for furniture or a computer, the lender will have your item as collateral for the loan, and can try to repossess it if you default. Their risk is a little lower, and you might be able to find such a loan. But again, with bad credit, the terms – the interest rate, fees and more – will be high.
Determine before you start what you are going to use the loan for. If you’re planning to use it for debt consolidation, make sure you have a plan in place to really replace the other debt, and not just add this loan on top of what may be already bad credit. If you are borrowing money for the short term, knowing you are getting an insurance payment for example or a bonus from work, you’ll know you can pay off the loan quickly. If you need to borrow money to afford transportation to a new job for example, the cost might be worth it to make more money at a higher paying job.
But if you have bad credit, don’t take steps to compound your problem. Don’t just get another bad credit loan for something that is not an emergency. Think twice though before taking out more cash just to buy holiday gifts, for example, if you already struggle with your current debt and have bad credit. Try to make this a step in the right direction to eliminate debt and rebuild your credit with a loan you can afford and pay back on time.
Before you start applying for bad credit personal loans, find the best lender with the most favorable terms. You’ll want to look at the fine print too. Ask about these fees and charges:
- Is there an up front application fee or processing fee? Is there a fee to pull a credit report?
- What is the interest rate? What is the APR (annual percentage rate)? If the APR is higher, why?
- Do you need to provide collateral for this loan, or is this loan unsecured? (If you have bad credit, a lender may need security for the loan.)
- How soon will you have a decision? How soon will you receive the the loan funds?
- If you are turned down for the loan, is there a related company that can process the loan?
Don’t just look at the monthly payment, because many hidden fees and charges can be included. Make sure you compare all loan products before you apply with any particular lender – each time you apply for a loan, you will impact your credit score, so keep it to a minimum!
Some alternatives to getting a bad credit personal loan are finding a bad credit credit card and using the cash for what you need, or borrow against a retirement account if your employer allows it and you have the money in your retirement account.