Last year, I had a serious of medical issues that caused me to rack up some serious debt. Healthcare costs wiped out my savings, so I had to rely on a credit card to pay off the rest. Soon, I had a five-figure balance at 18% interest and it just kept growing.
When researching my options, I learned about debt consolidation loans. When I ran the numbers, I found that taking out a personal loan would save me thousands. I ended up consolidating my debt, which helped me reduce how much I paid in interest and enabled me to pay off my debt years ahead of schedule.
Whether you’re like me and have credit card debt or are facing an emergency and need extra cash, a personal loan can be a useful tool. However, if you have less-than-stellar credit, finding a lender to approve you can be tricky. But, it’s not impossible. Here’s what you need to do to get a personal loan with bad credit.
1. Know your Credit Score
Figuring out your credit score is the first step in finding a personal loan. Knowing what is in your credit report and your score can help you see if you meet a lender’s eligibility requirements. It’s a starting point in identifying your options.
If your score is less than great, you can take some steps to improve your score before applying for a loan. That approach can increase your chances of getting a loan and help you get a lower interest rate.
Thankfully, there’s no need to pay any fees to find your credit score. CreditSoup® allows you to view your score free of charge.
2. Consider Using a Co-Signer
If you can’t get approved on your own because of bad credit, one way to still get a loan is to ask a friend or relative to serve as a co-signer. Using a reliable person with good credit to co-sign a loan can increase the likelihood of getting approved at a competitive interest rate.
Co-signers guarantee that payments will be made on the loan. In the event you miss payment, the co-signer is responsible for the payment. It’s a big responsibility to ask of someone, so only do so if you’re sure you can manage the payments on your own.
3. Look Into Peer-to-Peer Lending
If you can’t get approved by a traditional lender, consider peer-to-peer refinancing. With this approach, investors pool their resources to give you a personal loan. They often have higher interest rates than regular personal loans, but peer-to-peer investors are more likely to take a risk with you than most banks.
Check out these peer to peer lending sites to get started:
Like normal personal loans, you can choose a repayment term that works for you and your budget. If you need a relatively small monthly payment, you can choose a term as long as seven years to make it more affordable. Or, if you want to save money on repayment, you can select a 24-month term to pay off your loans faster.
4. Apply to a Credit Union
Credit unions operate like traditional financial institutions (such as banks), but focus on a specific geographical location, professional group or industry. Credit Unions are nonprofit organizations that are able to pass their savings onto their members, allowing for lower interest rates and fees across the board on loans and services. And, they often have higher loan acceptance rates than your average bank.
5. Research lenders who offer personal loans for those with bad credit
If you’ve exhausted your other options, your situation isn’t hopeless. There are a number of lenders who provide loans specifically designed for borrowers with bad credit. Depending on your situation and finances, you could get a loan with an interest rate ranging from 4.99% to 35%. Whether you need $1,000 or $100,000, there are lenders willing to work with you.
If you need a personal loan but have bad credit, check out our list of lenders. Each lender caters to those with poor to fair credit and offer competitive interest rates. And, you can get the money you needed quickly; some will process your application in under an hour and disburse your loan with one business day.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.