Many Americans each year fall into more debt, and many more will experience bad credit, with approximately 16% of US citizens currently having bad credit scores. While having a bad credit score can be stressful, with many lenders not considering people with bad credit scores as potential applicants, it is still possible to apply for a loan when in financial need.
Read our guide to find out more about everything you need to know when applying for a loan with bad credit, from how to get a loan with bad credit, where the best place is to apply for a loan with bad credit as well as what types of loans are best for those experiencing poorer credit scores.
Can I Get a Loan with Bad Credit?
Yes, you can still get a loan even if you have bad credit. First, let’s bust the myth that those with bad credit cannot get a loan – as this isn’t true. While it is important to not apply for a loan if you are experiencing severe ongoing debt and a bad credit score, it is still possible to get a bad credit loan.
Many people, even those with bad credit scores, need to borrow loans in financial emergencies. From helping pay for bills, repair broken boilers or cars to helping redecorate homes before selling them. Loans are still an option if you have bad credit.
How to Apply for a Loan with Bad Credit?
Applying for a loan with bad credit is done in the same way as you would if you had good credit and need to borrow money instantly or within a few days. Simply find the best online loan matching service, or direct US lender, by doing some research online.
Many will still opt to apply for a loan with bad credit by visiting an in-store lender. However, applying for a loan online is made even easier today. With many companies offering fast services and same-day decisions, applying for a loan online may be best for you.
Keep in mind that while you can still get a loan with bad credit, your financial history may be reflected in the lender’s interest rates offered. In addition, you will still need to be eligible to apply for a loan – such as being of legal age, legal citizen status as well as living in a state where it is legal to borrow a loan.
Where Can I Apply for a Loan with Bad Credit?
You can apply for a loan, as briefly mentioned, either through an in-store lender or online. Depending on which you choose, you must ensure beforehand to face disappointment and further credit checks, that the lender offers loans to those with bad credit.
Provided you meet the eligibility criteria, you can find online direct US lenders who will offer those with bad credit same-day funding.
It is advised, nonetheless, to not apply for several loans at once with bad credit. When applying for loans, many lenders will run a hard credit check which will slightly affect your credit score. They do this to ensure that you are in the right financial position to borrow money and repay it.
Which Loan Company Is Best for Bad Credit?
Which loan company is best for bad credit depends on your personal financial situation as well as other factors. Firstly, it is important to do some quick research regarding the company you are considering, to ensure it is secure, safe and reliable.
You should always check that a loan-matching service or direct lender is legal in the state in which you apply for a loan. In addition, you should check generally how much money you can borrow as well as what their repayment agreements typically look like. For example, if you need a payday loan in Texas, the laws surrounding payday lending and loans will differ when compared to say, a payday loan in Alabama. Furthermore, reading up some of their reviews will give an indication as to how trustworthy and reliable their services are for customers with bad credit.
Which Type of Loan is Best For You?
Having now understood how to, where to and whether you can apply for a loan with bad credit, the next step to consider is which type of loan is best for you with bad credit. Below, we have compiled a short list of several different loans available in the US to those with bad credit scores. You should always remember that the worse your credit score, the less likely lenders are to be willing to lend you money on the same basis as someone with good credit. For example, if you need to borrow $600 with bad credit, it will be tougher than if you needed to do so with good credit. Read on to find out which best suits you.
Bad Credit Loans
Bad credit loans are designed in the form of unsecured personal loans, meaning they require no collateral such as a house or car, but may still allow you to borrow $1000 with bad credit or even more if you need it. This makes these a great option for those that are not in the financial position to surrender any remaining assets. Bad credit loans are also easy to apply for and will guarantee a successful application.
Bare in mind that bad credit loans do come with higher interest rates alongside stricter rules surrounding what they can be used for. Only apply for bad credit loans if you are in a financial emergency, such as in need of funds to fix a broken car, as taking out a new loan will lower your credit score initially and potentially worsen it if you cannot repay it.
Payday Loans for Bad Credit
As the term implies, payday loans are for those that need money fast before their next payday. Payday loans, similarly to bad credit loans, are also personal loans advertised under the premise that you can receive funds quickly in financial emergencies.
There will, unfortunately, come a time in one’s life where they require more money and may need some additional financial help. Even those with bad credit can apply for a payday loan which can help pay for utility or rent one month, or perhaps unexpected travel costs you have incurred.
Installment loans, by nature, are personal loans which can be borrowed over a longer period of time. Unlike bad credit or payday loans, installment loans enable people with bad credit to borrow and repay a loan over a longer period of time.
Installment loans may be a great option for you if you have other immediate ongoing debts to take care of, or if you would prefer to borrow money for longer to suit your financial needs. Nonetheless, it is important to keep in mind that taking out an additional loan to repay another ongoing debt of yours is strongly advised against, as doing so would only cause further debt issues.
Personal Loans for Bad Credit
Personal loans, as the name suggests, can be used for a variety of personal reasons. Personal loans do come as secured loans, however they are mostly unsecured loans meaning they are a great option to consider for people with bad credit.
These types of loans can be used more freely, as they require no collateral, such as helping pay for birthday or Christmas gifts when you need spare cash for other payments, or even to fund weddings.
A title loan, in contrast, is a secured loan which typically uses a person’s car as collateral. A person is required to surrender the hard copy of their vehicle’s title, in order to borrow money.
While this may seem daunting, title loans are a popular loan for those with bad credit. If you would like to borrow a larger amount of money yet have bad credit, then a car title loan may be right for you – as lenders usually allow you to borrow money compared to the value of the car.
The Advantages and Disadvantages to Getting a Loan With Bad Credit
Considering the pros and cons to borrowing a loan with bad credit may better help you understand whether borrowing one is right for you currently.
Advantages of Borrowing Money With Bad Credit
- You can eventually improve your credit score with repayments
- You can get money fast
- Loans can allow you to keep on top of other payments or costs in your life
- Some lenders provide tailored repayment plans according to your personal financial needs
- Life doesn’t have to be put on hold
- Online applications are easy and straightforward
Disadvantages of Borrowing Money with Bad Credit
- Not all lenders consider applicants with bad credit scores
- Avoiding or missing payments will worsen your credit score causing further financial issues
- Borrowing more money can lead to more severe debt
- Some fall prey to untrustworthy online lenders
- Missing repayments for secured loans can lead to repossession of vehicles or homes
Is Getting a Loan with Bad Credit a Good Idea?
Chronically borrowing money is never a good idea. However, like many, you may be struggling to find a lender who will lend to you when you need to get a loan to help better your credit score, while ensuring your other ongoing payments, like rent, utility bills and food can all be attended to.
Generally, there is no distinct answer as to whether borrowing a loan with bad credit is a good idea as this will depend on your personal financial circumstances. Nonetheless, it is important to consider what the long-term effects of borrowing a loan may have for you if you have bad credit, whether you can repay the loan and what you would like to specifically use the money for. By answering these questions, it should give a better indication as to whether borrowing a loan is right for you.