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It’s difficult to get a personal loan with bad credit, as lenders will likely require a higher credit score than normal. However, there are a few things you can do to increase your chances of approval.
1. Look for a reputable lender.
While a bad credit score may limit your options and require higher rates on loans, there are lenders who specialize in providing personal loans to borrowers with poor or fair scores. These lenders often have lower minimum credit score requirements than traditional banks and may also consider factors besides your credit, like income, debts and assets. You can find these lenders online, at many financial institutions and through local credit unions.
When shopping for a lender, it’s important to compare loan terms and fees. You can do this by checking the lender’s annual percentage rate (APR), which includes both interest and fees. It’s also helpful to look at the lender’s customer support options, as you may need help with payments or other issues that arise during your repayment term.
You should also check the lender’s legitimacy by mr cash loans reviews examining its state license and physical address, which you can usually find on its website. Lastly, it’s a good idea to read online reviews from other borrowers and verify the lender’s reputation before applying for a loan.
If you have a low credit score, it’s worth working on strategies to improve your credit before applying for a loan. By paying bills on time, reducing debt and refraining from opening new credit accounts, you can raise your score and qualify for better loan offers.
2. Check your credit score.
The credit score is a number that lenders use to determine your risk as a borrower. It is based on information in your credit report, which is created by each of the three credit bureaus (Equifax, Experian and TransUnion). The credit score takes into account your track record of paying your debts on time, the total amount you owe across all of your accounts, your credit utilization ratio or how much of your available credit you’re using and the length of your credit history. Your credit score can also be impacted by how often you apply for new credit or loans, which shows up in your credit report as hard inquiries. It’s important to check your credit score regularly so you can see what factors are impacting it, like inaccurate personal information or accounts that have been fraudulently opened in your name.
Some websites and credit card companies offer free credits scores, though this score may vary from the one a lender uses to evaluate your application. Lenders typically look at the FICO or VantageScore, which is a model created by the three credit bureaus.
3. Apply for a loan.
Before applying for a personal loan, check your credit report to ensure there are no errors that could affect your score. If you find any, dispute them with the credit bureaus to improve your chances of getting approved for a loan. Then, consider your needs and whether you can afford to borrow the amount you want. It’s best to only borrow what you can comfortably repay over time, or your lender may deny your application or approve a smaller loan amount at higher interest rates.
You can find lenders that specialize in providing personal loans for borrowers with bad credit. These lenders typically look at other aspects of your application, such as income and existing debts, to determine if you qualify for a loan. They may also limit your debt-to-income (DTI) ratio or require collateral to back the loan.
To get the best possible deal on a bad credit personal loan, apply with multiple lenders and compare their rates, fees and terms. You can also use an online calculator to see what your monthly payments might look like with various rates and loan amounts. Alternatively, you can try to add a co-signer or co-borrower with a good credit history to boost your approval odds and potentially lower the rate. However, be aware that if you fail to make your payments on time, the lender can take the co-signer or co-borrower’s credit into consideration.
4. Make your payments on time.
Lenders want to know that you can pay back your loan on time. To determine this, they look at your credit score and history of borrowing. A good credit score can help you qualify for lower rates on loans and credit cards. A bad credit score, however, may make it harder to get loans or may lead to higher interest rates on loans and credit cards if you are approved. NerdWallet’s personal loans content is produced by a team of writers and editors that specialize in consumer lending.
