One of the most searched questions on Google is how to get a bad credit loan approved. Having a bad credit can seem like a death sentence. It can prevent you from obtaining necessary financing. Whenever someone encounters a huge expense which they cannot afford through their saving, it is common for them to rely on debt. It allows them to pay for an extensive medical procedure or massive purchase. A personal loan provides a lump sum amount which is repaid in the form of monthly instalments. It is even possible to seek a personal loan for consolidating high-interest debt.
Lenders scrutinize your credit score and overall standing during the application process in order to assess whether you have the ability to repay the loan or not. If your credit is not in perfect shape, chances are that you would struggle to seek a loan with a decent interest rate or even get approved. However, there is no need to worry as there are a few lenders that offer personal loans to individuals that have bad credit. Thus, you can expect bad credit personal loans guaranteed approval when you apply for a loan from them. You can expect a higher chance of approval through them.
Is It Possible to Qualify for a Personal Loan If You Have Bad Credit?
The truth about the underwriting criteria for personal loans is that every lender has their own requirements. It is common for most lenders to examine your credit score before even considering your application. Thus, your credit score is part of the qualification process. If you have a credit score of less than 660, it can be extremely difficult to seek a personal loan. There are lenders that have strict borrowing criteria. This is why you are likely to get rejected for a personal loan. The good news is that there are many online-only lenders that are more willing to provide a personal loan to bad credit customers and tend to be more flexible.
When you apply for a loan, it is important to keep in mind that the credit report is not the only factor that is considered. It is also common for lenders to review information about your employment and income along with assets to get an idea about your true financial picture.
There are many personal loan lenders that use alternative data for the approval process. It means that they would look beyond the credit report and consider your bank account information and history of utility payments.
Cost of a Bad Credit Loan
The cost of the personal loan varies depending on your financial standing, loan terms, and the lender you turn to. However, it is important to understand that personal loans can cost more for individuals that have bad credit. The average interest rate for a personal loan is 9.5% at present. But, borrowers with bad credit would need to pay more. Expect to pay around 14% to 16% if you get approved. A personal loan from a traditional bank might not require you to pay original fees.
To qualify for the bank loan is another story since individuals with bad credit are likely to get rejected. If you seek an online lender, you would need to be able to pay the origination fees as they would be added to the overall loan cost. The fees would be charged based on the total loan amount which would be factored into the percentage rate per annum. There are lenders that take the origination fee from the loan amount once it has been received. Generally people that have the worst credit would need to pay a higher fee as they would be considered riskier. Regardless of whether you need to pay the origination fees or not, it is vital to know that the credit score has an impact on your overall interest rate. Only those individuals get the lowest rates that have excellent credit.
In addition to the above, the term and the amount being borrowed would also affect the rate. The greater the internet rate the more money you would end up paying in the form of interest fees. An online lender would provide you with a loan even if you have a lower credit score. Thus, you should not have anything to worry about. But, you need to be prepared to pay higher interest rates and origination fees.
How Can You Get A Better Interest Rate?
The easiest way to get a loan for a lower interest rate is by improving your credit standing. Improving your credit would also mean that you would need to pay a lower origination fee. In fact, if your credit becomes strong, you should qualify for a lender that does not require you to pay an origination fee. However, it takes time and commitment in order to improve credit. Therefore, you might not have the luxury to wait if you need a loan urgently. But, it is always best to work on your credit before applying to get a loan for lower interest rate. Thus, you would end up saving money.
How Can You Get A Bad Credit Loan Approved?
Most traditional banks do not provide a personal loan. As for those that do offer a personal loan, they have stringent credit criteria. Hence, it might be best that you apply for a loan from an online-only lender or credit union as they tend to specialize in bad credit loans. There are some credit unions and banks that even showcase their online application which means that you would get an idea about their requirements for faster funding and overall approval.
It is best that you compare the lenders before you apply for a loan since every borrower has different requirements, fees, terms, and loan amounts. It is possible to get prequalified before you complete the full application. Make sure to see the offer and check your rate to enable your success. Look for verbiage which mentions that your credit would not get affected by seeking the loan for the best experience.