If your credit score is less than 620 and you are need of a loan, you know that you are in for a tough bind. Financial institutions make it very difficult for anyone with a not so great credit score or credit history to avail a personal loan, let alone avail one with reasonable interest rates.
But, if you know where to look, you will find that there are reasonable loan options for bad credit scorers as well. This post will introduce you to those options.
Before we begin, it will be well worth your while to explore options with which you can raise your credit score. If your credit score is being weighed down by a few late payments that you made in the recent past, there is a possibility that you can get those black marks reversed. Try talking to your creditors to explain to them that those late payments were exceptions due to misfortune and that you otherwise have a clean slate with them. They might not always reverse the reporting they did but there is a chance.
Another way to increase your credit score fast is to check your credit report for any errors. If you don’t have a recent credit report, please get one, for free, from AnnualCreditReport.com . That website allows you to receive one free credit report every year.
It is not uncommon for many to find errors on their credit report. Simple errors like a line item that says you didn’t pay a bill when you paid it months ago can easily be dragging down your credit score by as much as 100 points. It is therefore imperative that you look through your credit report at least once a year to make sure everything is in order and that your credit score is a true reflection of your credit standing. Also, at our own Money Looms, we have written an article on ways to increase your credit score fast.
Loan Options for people with not great credit
Avant will work with you as long as you have a credit score of at least 580. They are an A+ Rated BBB business. Their borrowing limit caps off at an impressive $35,000 and APRs also start at a reasonable 9.95%. However, please understand that the APR you will pay will be much higher if you are hovering between the 580-620 range.
A great benefit with Avant is that you can typically receive your loan in just one business day, if approved. You will also have the convenience of paying back your loan over 2 years or will have the option to stretch repayment up to 5 years.
Origination fees are a bit high and will cost you anywhere between 0.95% and 4.75%. Please remember that origination fees will be deducted from the loan that is awarded to you. In other words, if your loan approval specifies an origination fee of 3% and you are entitled to a $1,000 loan, you will only receive $970 in hand.
PersonalLoans.com is a not a loan provider per se. What they rather do is put you in touch with a whole host of loan providers who are willing to work with less than average credit applicants. They have been known to work with people who have really bad credit as well. Their site offers an easy to use calculator that you can use to figure out your repayment over different repayment periods. You will also be given the option to see how your repayment pans out based on different APRs that might be applied to you, when you eventually take out a loan. This is a useful feature as you will receive a lot of different offers that might be difficult to compare without the help from the tools they provide. For example, one lender might be willing to lend you $2,000 at 25% APR but with a 1 year repayment period whereas another lender might be willing to lend you $2,000 at 30% APR, but with a 3 year repayment period.
The interactive tools just make it easier for you to figure out what loan will be a good fit for you. Elite Personal Finance have a good resource page on bad credit loans from PersonalLoans.com. The resource page explains why and how a loan from Personal Loans will be a good choice.
Peer to peer options
There are several peer to peer lending platforms where you can potentially receive a loan from an individual investor. The most popular peer to peer lending platforms are Peerform, Prosper and Lending Club. Though it takes about 2 weeks for a loan to be approved and issued, there is a much higher chance of you receiving a loan at reasonable interest rates at these lending platforms. The reason being that individual investors try to find out more about you and don’t just look at you like an application that shows just a credit score. They want to find out why you need the money, what you will do with the money and so on.
In other words, if you have a good business and need some money just to ease up your cash flow and can clearly see your financial standing improving in just a few weeks, an investor might understand that and give you a loan at a reasonable rate, a rate that you just can’t get through a traditional less than perfect credit loan lender.
Secured loans for applicants with less than average credit
Lenders like OneMain have lent over $120 Billion in loans to over 10 Million customers, over several years. They are an A+ BBB accredited business. Even if you have less than average credit, you may apply for a secured loan by putting up your home as collateral. You also have the option to apply with a co-applicant who has a solid credit score. They generally issue loans for only less than $10,000, with APRs ranging between 25% and 36%. Hundreds of thousands of people with a credit score of less than 600 have managed to secure a loan from OneMain, by putting up collateral or by applying with a co-applicant.
For a more comprehensive list of all the vendors that you can consider before choosing a loan for your not so great credit profile, please go to this resource page The Simple Dollar. NerdWallet, another fantastic personal finance site with great advice also has a resource page on loan options for people with less than stellar credit scores.