How to apply for personal loans if you have a bad credit score
People with bad credit scores might find it difficult to get a personal loan. At such times, they may also fall prey to loan sharks who will try to dupe them. However, today, numerous lenders are willing to give personal loans to people who have bad credit scores.
Here is what you need to know about the application process:
What is the personal loan application process?
It is crucial that you understand the process to get personal loans with bad credit scores:
- Preapproval is the first step towards a personal loan application. You can get a preapproval if you have a history of making payments on time. Other factors to remember for preapproval are you need to be in a stable job, and your FICO® score must be 600 or above.
- You need to look at the terms of the personal loan thoroughly. You should also read the restrictions imposed. You must be aware of the annual percentage rate (APR), late payment fee, origination fee, the frequency of payments, and the repayment period.
- You are in the safe zone when you only have a few accounts and short credit history. Hard inquiries tend to have an impact on your credit rating. A credit report states the number of hard inquiries made.
- When you repay your loan on time, this is reflected positively on your credit score. If you pay late, then you will end up paying a higher interest rate. Always ensure that you avoid any extra fees due to late repayment.
What factors should one consider while choosing a lender?
You should never jump into taking a personal loan with a bad credit history, and you need to consider various online and offline options before you choose one. The following factors will help you pick a lender:
- Lending companies: Two types of lenders give easy loans with bad credit — private banks and peer-to-peer marketplace. Private banks are secure but have more requirements to get loan approval.
- Qualifications: You are eligible for loans if you have a minimum FICO® score of 600. Different lenders will consider different durations of credit history.
- Loan term: After getting a preapproval, the lender will give you the loan terms. You should be clear about the APR, loan period, fees, and restrictions. Accept these terms only if they are alright with you.
- Cosigner: Some lenders offer a cosigner option. The cosigner will need to make payments if you are unable to do so.
- Repayment: How flexible is the repayment? Is there more than one repayment option available? Can you save money if you pay on time? You need to check for all of these repayment options.
- Interest rates: Your credit score will determine the interest rates. If you have a poor credit rating, you will need to pay a higher rate of interest.
- Fees: Check if there are penalties for late payments. Also, confirm if the lender charges pre-processing fees.
Can one get personal loans based on their educational qualifications?
Upstart gives the best personal loans to people with bad credit.
- Upstart is a peer-to-peer marketplace lender. The benefits include flexible payment date, and the ability to borrow with little or no credit history.
- Your eligibility for a loan is purely determined based on your career history, test scores, and educational qualifications. Thus, even if you have a bad credit score, you are likely to get a personal loan.
Who is the best loan lender for people who have a cosigner?
If you have a cosigner and you want personal loans with a bad credit score, then LendingClub is the best company to choose.
- LendingClub is one of the best peer-to-peer marketplace lenders.
- You can get low-interest rates.
- LendingClub offers a temporary hardship plan which can be beneficial if you are finding it difficult to make timely payments.
Which are the best lenders for people with low credit scores?
Peerform and Avant give personal loans to people with bad credit scores.
- Avant: It does not charge any prepayment fees which is very helpful. They provide flexible payment options. If you pay for your loan quickly, you won’t have to pay a fee. When you make a payment ten days after the deadline, you will be charged $25. However, Avant will refund this amount if you pay on time the next three times.
- Peerform: Peerform is known for its transparency. You get a score, which is computed with the help of an algorithm, depending on your credit score. This score will determine the rate of interest you have to pay. Both of these are reflected in your account. You can delay the payment by ten days if you give a notice in advance.