I have been through this phase when getting a small personal loan with bad credit becomes impossible. If you have a bad credit history for some reason, your chances of securing a loan are thin.
Most of the time we lose our credit score because we don’t understand the exact reasons, so here in this article, I will explain everything about bad credit, Personal loans, and lenders that provide small personal loans with bad credit.
Let’s dive in…
What is a Personal Loan?
Let’s say you want to renovate your house, or plan a wedding, you don’t need a large sum of the money for this, and you can look for the lenders to get a small personal loan.
Now, this money that you will borrow will be considered a personal loan, this loan can be secured or unsecured. You will have to return this money to the lender through fixed repayments, or installments.
What is a Secured Personal Loan?
A secured personal loan is the money that you borrow against collateral or in other words something valuable. So if in any case, you are unable to pay back, you will lose the thing that you used to borrow the money.
What is Unsecured Personal Loan?
An unsecured personal loan is money that you borrow without collateral. In this case, lenders will check your credit score and decide whether you should be given a personal loan or not.
It is completely up to lenders to give you an unsecured personal loan, some of them will charge a fee too.
Where to Get a Small Personal Loan?
It is always better to rely on your income and savings to cover your expenses, but sometimes things fail suddenly and you are not fully prepared for this breakdown.
In such cases you can apply for a small personal loan, these are the platforms that offer personal loans.
1- Banks
2- Credit Unions
3- Online Money Lenders
4- Personal Finance Apps
5- P2P Apps
Reasons To Apply For a Small Personal Laon?
Getting a personal loan is definitely a personal thing, you can apply for a personal loan for any reason, but here I am listing the general reasons for which most people apply for a small personal loan.
Reasons for getting a personal loan:
- Debt Consolidation
- Wedding
- Home Renovation
- Medical Expenses
- Funeral Costs
- Vacation Expenses
- Unexpected Expenses
What is a Bad Credit?
We all borrow money at some point in our life, just imagine that you have borrowed some money from your friend, and promised him to return the money within a month. Now if you return the money as promised, he will consider you a person of trust and will most likely lend you the money again if needed.
However, if you were not able to return the money as promised, your friend will not trust you with the money ever again or will at least hesitate to lend you the money again.
That is the same thing with bad credit.
So, bad credit means that a person has a history of not returning the due payment, it also shows that the person might not be able to pay even in the near future.
Credit history is reflected through a Credit score, High credit score shows that you have a good credit history and a low credit score shows that you have a bad credit history.
It is difficult to get a personal loan with bad credit even a smaller one.
What is a Bad Credit Score?
There are some credit scoring models, that are used to check someone’s credit history. It is a 3 digit number that reflects how a borrower will repay his debt. FICO, Equifax, TransUnion, and Experian are some of the platforms that you can use to check your credit score.
FICO, however, is the most popular platform that is used to check someone’s creditworthiness. FICO has a credit score scale of 300 to 850. People with a FICO score of 579 or lower are considered to have a bad credit history.
You can check your credit score here. If you fall under 579 then it would be difficult for your to secure a small personal loan with bad credit.
What Makes Up a Bad Credit Score?
Your credit information is divided into five categories by FICO. These categories have different impacts on your credit score.
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Payment history: 35%.
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Amounts owed: 30%.
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Length of credit history: 15%.
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Credit mix: 10%.
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New credit: 10%.
The percentage shows how much each category contributed to your overall credit scores. Payment history and the amount owed are the main contributors.
Bad Credit Loans
As more and more people in America are living paycheck to paycheck, most of the time they don’t have enough savings to cover the unexpected costs. Therefore, they need small personal loans.
However, a bad credit score will make it difficult to secure a loan, or with good terms and conditions at least.
The good news is that it is possible to secure small personal loans with bad credit too. There are many lenders, that will give you an unsecured bad credit personal loan with an interest rate that is a little bit higher than normal personal loans.
Sounds good, eh?
It is not that simple though…
Bad credit loans sometime will push you to the brink of bankruptcy if you don’t understand how it works. Understand the points that determine if the terms of a bad credit personal loan are reasonable or not.
I will now explain what should you look for before getting a personal loan with bad credit.
Things To Consider Before Selecting a Money Lender for Personal Loans with Bad Credit
Before applying for a small personal loan with bad credit, it is wise to check some important aspects, what is the interest that you will be paying on this loan? What are the terms and conditions of the personal loan by the lenders?
These are the few things that you must study carefully before applying for a bad credit personal loan
1- APR
A loan’s APR or Average Percentage Rate consists of the interest rate plus any fees a lender charges. Many bad-credit online lenders charge an origination fee — a percentage of the loan the lender takes out before giving it to you — and it should be included in the APR. The highest APR an affordable small personal loan with bad credit should have is 36%, according to most consumer advocates.
2- Repayments
This is also a very important factor, you should first calculate how much money you can repay every month. If you are borrowing a small personal loan with bad credit and you have to pay small repayments every month, it is a good loan offer.
3- Debt to Income Ratio
If your income is lower than the debt that you are applying for, chances are that your loan application will be rejected. Lenders usually like to see DTI below 40%.
4- Compare Multiple Loan Offers
If you have multiple loan offers, you should compare other aspects too, check if the lenders offer a credit score building assistance or not, compare the funding time, etc. Chose the best small personal loan offer after a thorough comparison.
Now that you know the fundamentals. Let’s move on to where can you get bad credit personal loans.
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Small Personal Loans with Bad Credit
Let’s talk about the lenders to apply for a small personal loan with bad credit.
1- Upstart
The award-winning company of 2022 for the best lender with bad credit. Upstart, as its name indicate is a reputable firm, that helps people who are new to credit or have a bad credit history.
With no minimum requirement of credit score, Upstart gives opportunity to almost everyone to apply for a small personal loan. With quick application processing, you can secure a personal loan despite your bad credit within 24 hours.
Features
Upstart not only gives people with a bad credit score a chance to secure a small personal loan but it also counts your education, job history, and area of study. This may help you to secure a loan with better payment terms and APR.
Personal loans that you can secure on Upstart range from $1000 to $50000. You also have the freedom to choose repayment tenure. You can either return the payment within two years or five years.
Pros
- No minimum credit score requirements
- Accepts applications from people new to credit
- Quick funds released, within 24 hours
- You can avail the option of direct payment to creditors
- Flexible repayment time
Cons
- Charges origination fee of up to 8%
- You can only choose between two repayment time durations
- APR can go up to 35.99%
- Doesn’t have any mobile app
Eligibility Criteria
If you want to get a small personal loan with bad credit from Upstart, you should meet the following requirements
- You should be a U.S citizen or a permanent resident
- You must have a full-time job, a full-time job offer starting in 6 months, a regular part-time job, or another source of regular income.
- You must be 18 or above
- An active checking account is required
- A minimum gross income of $12000 is required
Also Read: Is Student Loan Interest Deductible?- Everything You Need To Know
OneMain Financial
This is another great option to get a small personal loan with bad credit. Why? because you can apply for both secured and unsecured loans on OneMain Financial.
There is no minimum credit score requirement too. So you don’t have to worry if you have a poor credit score.
As OneMain Financial also offers secured loans, so most of the borrowers have the chance to get a personal loan with bad credit against any collateral such as a motor vehicle.
You can get loans ranging from $1500 to $20,000 and the repayment terms are also flexible, you can choose from 24, 36, 48, or 60 months to return the loan.
Features
Most of the mainstream lenders only offer unsecured loans to the people with bad credit, OneMain Financial, however, is a platform that also offers secured loans.
So the borrowers who want a small personal loan with bad credit can get a loan from OneMain Financial. You can also secure larger loans on this platform against collateral. The APR on loans may range from 18% to 35.99%.
Pros
- You can apply for both secure and unsecured loans
- Borrowers can choose their payment dates
- Loans will be funded within one business days
- You can get in-person service in over 1500 branch offices.
- A direct creditor payment option is available
- No early Payoff fee
Cons
- Higher rates than other online lenders
- The origination fee is not fixed and varies with states
- Higher minimum APR of 18%
- No discounts are given on Autopay
Eligibility Criteria
Getting a small personal loan with bad credit on OneMain Financial is easy, and the eligibility criteria are also simple
- There is no minimum credit score required
- You need to have some assets if you want to get a secured loan, e.g house, or a motor vehicle not older than 10 years.
- You should have a checking account in your name
- No minimum income requirement is $7200
- You should be 18 or above
Also Read: Get Payday Loans The Same Day- Instant Loans
Universal Credit
If you are looking for a small personal loan with a bad credit score, whether you need it to fix your car or repair a leaky roof, Universal Credit has got you covered.
There is no waiting, online form submission on Universal Credit made the process much simpler, you can easily and quickly access the funds within 24 hours. The best thing about this platform is that its loans come with fixed rates and predictable payments which make it easy for borrowers to budget around.
Universal Credit is powered by Upgrade, Inc. a neobank that has helped more than 350,000 customers pursue their financial goals since 2017 with billions of dollars of affordable credit.
Features
If you are getting a small personal loan with bad credit and it is not predictable and the payment rates are not fixed, you are causing yourself extra trouble. This will keep you confused about when are you gonna get the payment.
Universal credit has fixed rates and predictable payments which makes it easy for you to budget around.
If you are applying for a small personal loan, it means that you need it urgently, and if you can’t get your hands on the money in time, it is useless, Universal Credit funds money on when day exactly when you need it.
Another good feature that this platform has, is an easy online form submission process and mobile access so that you can keep a track of the loan status. This also allows borrowers to get support when needed.
You can monitor your credit for free so that you always know where you stand. All personal loans have a 4.25% to 8% origination fee. The APR on loans can range from 8.93%-35.93%.
Pros
- Offers rate discount with direct payment to creditors on debt consolidation loans.
- As a borrower, you have the option to change your payment date
- You also get free credit score access, to keep a track of your progress
- Unlike OneMain Finance you get a 0.5% discount for setting up autopay
- The loan amount ranges from $1000 to $50000
Cons
- You will be charged an origination fee
- Secured loans are not available
- No, Co-sign or Joint loans
- Small personal loans have a 4.25% to 8% origination fee
Eligibility Criteria
Universal Credit does require a minimum credit score, unlike OneMain Financial and Upstart, you should have a minimum credit score of 560, which falls in the category of bad credit score according to FICO.
- A minimum Credit score of 560 is required
- You should have a checking account in your name
- The borrower should be 18 or above
- You need to have a minimum of 2 accounts on your credit history
- The borrower must have a debt to income ratio of 75% including mortgage and the loan you’re applying for.
An Overview of these Bad Credit Loan Platforms.
There are many other platforms that you can use to get a loan too, but other than these platforms most of them require higher credit score history, so if you are searching for platforms that provide small personal loans to people with bad credit, then talking about them is useless.
However, there are some online bad credit marketplaces that can also help you with a personal loan, If you really have a poor credit history, even below 300, you can get a small personal loan from these Online Bad Credit Loan Marketplaces.
Platforms discussed above will give you a small personal loan with bad credit, two of which have no minimum credit score requirements, the APR will however depend on your credit score, you will be able to get the funds within one business day.
Steps to Apply For a Small Personal Loan With Bad Credit
It is not impossible to get a personal loan if you have bad credit, there are many platforms that offer loans to people with bad credit history. The problem is that if you have not done your research you might end up getting a loan on very bad terms.
As you have a bad credit score and you need money, those giving you the loan will definitely try to exploit your situation, that is why I want you to follow these steps before applying for a bad credit personal loan.
Step 1– Keep track of your Credit Score
You have the right to get information about your credit score, sometimes your credit score isn’t as bad as you think. You can get a free credit report every year from the credit reporting agencies.
You can also access your weekly credit reports from AnnualCreditReport.com. Keep an eye on what’s on the credit report, and if you think something is not right, don’t hesitate to dispute it.
Step 2– Evaluate your financial situation
Knowing that you can get a small personal loan with bad credit makes people overexcited, and it is tempting to borrow more than you can afford.
An affordable loan is when you are earning more than what you are borrowing. You need to evaluate your financial situation first. Create a budget, and use some free budgeting tools, that will help you repay your loan.
Step 3– Don’t Forget to compare
Don’t just stick to one lender, you can take offers from multiple lending platforms, now I have shared most of the things that you need to check before applying.
Check APR from each lender, also ask for the origination fee, late fee, penalties, etc. So that you can choose the best lender to get a personal loan with bad credit.
Step 4– Use Prequalification
Many lenders provide the option of the prequalification check, Take advantage of it.
Step 5- Prefer Secured Credit Loans
Unsecured personal loans pose more risk to the lender, so they have strict terms, these lenders also have very high-interest rates. So if you are going for unsecured personal loans, you might end up paying a lot more than you actually should.
Secured loans however are easy to get and the lenders have no leverage. Although you are getting a personal loan with bad credit, but you are getting it against some valuable thing. So the APR that you will have to pay in this case will be lower.
Step 6– Get some extra help
If you have a friend or a family member who has a good credit score and is willing to help you. Get that help. You can make them a co-signer, they will be taking partial responsibility for the loan and may be required to repay if you fall behind on payments.
A co-signer with good credit history can help you secure a loan with lower interest rates. Not all the online money lenders allow co-signer so you might have to do some research first.
Step 7– Prepare all of your documents
You will be asked for some documents while applying for a small personal loan with bad credit, these documents will include pay stubs, tax documents, your ID, SSN, and employer’s information.
Some lenders might ask for other documents too.
Verdict
I will conclude this article by saying that getting a small personal loan with bad credit is not impossible, you can secure it from many online and in-person lenders.
But I will stress budgeting and saving money, A loan, in the end, is a loan. You will have to repay it, no matter what and you don’t only repay it, but you give a lot extra.
So why not save, and create wealth that you can rely on in the hour of need. In this era of information technology, saving money and investing it has become much easier.
You can use Free budgeting Apps, that will help you save money and repay your loans. You can also get apps that actually help you save money or apps that will invest for you without you even noticing.
Use these best tools to save money for yourself and avoid loans.
Let me know in the comments if this article was helpful.
Cheers…