8 Best Personal Loans for Bad Credit of December 2022

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When you have bad credit, it seems like it comes back to haunt you at the most inconvenient times. But, whether you have a medical emergency or your car gets totaled, there may come a time when you need extra cash fast.

You don’t have to resort to title loans or payday lenders automatically. There are actually several online lenders who specifically cater to people with bad credit.

With the installment loans below, you will receive a higher interest rate than borrowers with good credit. But, you can sometimes use them to pay off credit cards with even higher interest rates.

8 Best Personal Loans for Bad Credit

To help you with your search, we’ve compiled a list of the best online personal loans for people with bad credit history. You’ll see a diverse mix of options and ideally find the right choice for you.

MoneyMutual

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  • Loan Amount
    $250 – $5,000
  • Loan Term
    Varies
  • Minimum Credit Score
    Varies
Overview

MoneyMutual is an online matching service for small short-term loans. Although it is not a direct lender, it can help you find the best lender for you.

To get started with MoneyMutual, you will fill out a form with your information for lenders to review. You may get several offers in a few minutes from various lenders.

You are under no obligation to accept any of the offers. Make sure to read through the loan terms of each offer to ensure it fits into your budget before accepting the loan agreement.

A few of the borrow requirements include a consistent income of at least $800, age 18 or older, legal U.S. residency, and an active checking account. If you can provide information that confirms each of these requirements, you will likely receive several loan offers.

If you need money quickly, this could be a suitable option because you may receive the funds within 24 hours.

Read our full review of MoneyMutual

CashUSA

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  • Loan Amount
    $500 – $10,000
  • Loan Term
    3 to 72 months
  • Minimum Credit Score
    Flexible
Overview

CashUSA is an online lending portal that puts you in touch with offers from a partner lender.

Income and credit requirements are flexible, so it’s a quick and easy way to access personal loan funds, regardless of your credit history. So if you have a poor credit score but need a personal loan, you could potentially qualify for a loan through CashUSA’s network.

Lenders through this website offer unsecured personal loans for bad credit ranging from $500 to $10,000. APRs range from 5.99% and 35.99%.

What are some requirements for a personal loan through CashUSA’s network?

You need to be 18 years old and have a valid bank account. This is used for both depositing your funds and automatically withdrawing your monthly payment on the due date. You also need to make at least $1,000 after taxes each month.

To submit a loan request, you fill out one simple form through their website.

When you accept a loan you like, you can get funds fast — sometimes as fast as the next business day.

Read our full review of CashUSA

BadCreditLoans.com

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  • Loan Amount
    $500 – $10,000
  • Loan Term
    3 to 60 months
  • Minimum Credit Score
    None
Overview

Rather than being a direct lender, BadCreditLoans.com serves as a loan marketplace that works with multiple lenders.

After filling out a single request form, they send your application to their large lender network that can then respond to you with a loan offer.

As the name implies, they offer bad credit loans to people with extremely low credit scores who need cash fast.

Here are some of the requirements the lenders are looking for. You must be at least 18 years old, a legal U.S. citizen, and have a steady income for the last 90 days (from a job, disability, or Social Security).

You must wait to receive an offer from the website’s network of lenders. Depending on your request, you may or may not be offered a personal loan.

You’re never under any obligation to accept any offer you receive, so you can make sure it fits your budget before deciding.

Read our full review of BadCreditLoans.com

PersonalLoans.com

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  • Loan Amount
    $500 – $35,000
  • Loan Term
    3 to 72 months
  • Minimum Credit Score
    580
Overview

PersonalLoans.com is another loan marketplace where you get connected with a lender based on a single online form.

Because the lenders vary, the available APRs vary as well. Expect to see personal loan interest rates from 5.99% to 35.99%.

They work with three different types of lenders, each of which has different minimum requirements. For example, P2P lenders have a minimum credit score requirement of 600. You must also earn at least $2,000 a month in verifiable income.

Both installment lenders and bank lenders require just a 580 credit score. However, with a bank loan, you’ll need at least $3,000 in income. You must be at least 18 with a social security number, regular income, and a valid checking account to qualify for all bad credit personal loans.

Another requirement is that even with bad credit history, you cannot have had an account with a late payment longer than 60 days or a recent bankruptcy.

If you meet these requirements, this could be an excellent choice for various types of bad credit loans.

Read our full review of PersonalLoans.com

NetCredit

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  • Loan Amount
    $1,000 – $10,000
  • Loan Term
    Varies
  • Minimum Credit Score
    Varies
Overview

NetCredit has a Built-In Credit-Builder program that ensures your payments are reported to two credit bureaus (Experian and TransUnion).

Here’s what you need to know about NetCredit bad credit loans.

They will check your credit score, but it’s only a soft pull, so it won’t hurt your credit. If you qualify, you can either accept the loan terms as they are or choose to “modify your loan details.”

Loan rates and term lengths with NetCredit vary depending on the state in which you live. In general, expect to start around 36%. However, in some states without rate limits, you might see that number jump up to 155%.

NetCredit personal loans are available in the following states:

Alabama, Arkansas, Arizona, California, Delaware, Florida, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, North Dakota, New Mexico, Ohio, Oregon, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, Washington DC, and Wisconsin.

You’ll want to be careful of the high end of NetCredit’s interest rates. However, you may want to consider them if you live in one of the eligible states and don’t have excellent credit.

Read our full review of NetCredit

Avant

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  • Loan Amount
    $1,000 – $35,000
  • Loan Term
    2 to 5 years
  • Minimum Credit Score
    600
Overview

Avant is a solid lender for bad credit loans. They offer higher loan amounts, and interest rates range between 9.95% and 36% APR.

But here’s what we really love about Avant.

Most borrowers with this lender actually report quick upticks in their credit scores. Why? More than half of all Avant loans are used to consolidate credit card debt. As a result, users report an average of a 12-point jump in credit score within the first six months of having the loan.

If you don’t need to consolidate your debt, you can also apply for a loan to pay for home improvement costs or emergency expenses.

With over 600,000 customers helped and a decision within minutes of applying online, they offer a lot to borrowers who need financial help while remedying bad credit.

Read our full review of Avant

LendingPoint

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  • Loan Amount
    $3,500 – $20,000
  • Loan Term
    24 to 48 months
  • Minimum Credit Score
    600
Overview

LendingPoint targets poor and fair credit borrowers looking for a personal loan. You can borrow anywhere between $3,500 and $20,000 with interest rates ranging from 17.46% to 35.99% APR.

All personal loans are subject to a flat origination fee of 5% which will be deducted from the loan proceeds you receive. To qualify, you’ll need a minimum gross annual income of $25,000.

Another requirement is that your debt-to-income ratio should be no more than 45%.

Finally, applicants must live in one of the following states: Alabama, California, Colorado, Delaware, Georgia, Michigan, Missouri, Montana, New Jersey, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah, and Washington. If you meet these basic qualifications, then you’re a strong candidate for an unsecured loan.

Their loan application process is easy. Just pull together some basic documents, like your proof of employment and income, recent bank statements, a voided check, as well as your driver’s license.

Once you sit down to apply online, it should take no more than five minutes. If you’re approved, LendingPoint will provide you with different loan options to choose from. Pick one and receive your funds as soon as one day later.

Read our full review of LendingPoint

OneMain Financial

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  • Loan Amount
    $1,500 – $25,000
  • Loan Term
    Up to 60 months
  • Minimum Credit Score
    N/A
Overview

OneMain is a well-established lender specifically targeting individuals with bad credit. Typical APRs range from 25.10% and 36.00%.

The amount you can borrow depends on where you live, but it ranges from $1,500 to $25,000. The origination fee ranges from $25 to $40.

To qualify for a loan with bad credit, you’ll most likely need to take out a secured personal loan. For secured loans, you can use an automobile, truck, motorcycle, camper, or RV as collateral.

Whatever you choose, you must have an appraisal completed to ensure its value meets the amount of your loan. Vehicles also must be insured while the loan is active.

An interesting step in OneMain’s loan approval process is that you must actually go to a physical branch location to bring in your documents for verification and discuss your loan options.

Once you get your personal loan, you have flexible payment options each month. You can pay online or through their app, at a branch, through the mail, or even at a Walmart Service Desk. However, there is a fee each time you pay by debit card or at a Walmart.

Read our full review of OneMain

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How to Get a Personal Loan with Bad Credit

Even with a bad credit score, there are several places you can go to look for a loan. One option is a local bank or credit union, especially if you’re already a member.

Credit unions – Some credit unions offer unsecured loans for bad credit with less stringent lending guidelines, and you may get a lower interest rate. The only issue is, you’ll likely need to apply in person, and you may have to wait longer to get the funds once you’re approved.

Get a cosigner – Some personal loan lenders allow you to add a second borrower to the application. This is so you can include their credit and income to improve your chances of approval. The installment loan will also appear on their credit report. So, any late payments or delinquencies affect them as well.

Home equity loans – If you have equity in your home, you may also want to consider a home equity loan.

Online lenders – It’s often the easiest and most convenient way to apply for personal loans for bad credit. That’s because there are lenders who specifically work with credit-challenged individuals.

Remember that you should only consider taking out an unsecured personal loan if you’re confident in your ability to repay it.

What is a bad credit personal loan?

When you apply for a loan, lenders will look at your credit score and credit history to determine how much of a risk they’re taking on in lending to you. A bad credit personal loan is a loan for borrowers with poor credit or thin credit histories. If your credit score falls in the range of poor or bad credit, which is from 300 to 579, then getting approved for a loan can be difficult.

However, there are lenders who offer loans for bad credit, as well as alternatives to traditional loans. This means that you can still qualify for a personal loan even if you’ve got poor credit. There are downsides that come with taking out a bad credit loan, however, and it’s important to be aware of all the terms before you sign.

Borrowers with low credit scores will be saddled with less than attractive loan conditions. Primarily, bad credit loans come with high interest rates, as well as harsh penalties. Like most personal loans, a bad credit loan will come with a fixed rate and monthly payments. Most options are unsecured, or not backed by collateral such as a home or vehicle. It may also be extremely difficult to find loan approval for a large-sum personal loan if your credit score is low.

Bad credit loans are extremely useful for those who need to borrow relatively small sums despite their low credit score. They can be a great way to build up thin credit history.

What makes up a bad credit score?

Credit scores are calculated by credit companies, the largest of which is FICO. Most lenders and banking institutions use FICO to calculate a customer’s credit score. However, the thresholds that your own credit score falls within could differ from lender to lender.

Taking FICO as an example, your credit score is calculated upon the following categories:

  • Payment history – 35%.
  • Amounts owed – 30%.
  • Length of credit history – 15%.
  • Credit mix – 10%.
  • New credit – 10%.

As you can see your history for making payments on time is the most significant factor in calculating your credit score. If your finances fall short in any of these categories then your credit score will take a hit, and missed payments will have the biggest impact. Understanding how your credit score is calculated, however, and where you’re falling short, is essential if you want to improve it in the future.

Types of Bad Credit Loans

While the two main categories of personal loans are secured loans and unsecured loans, there are actually several other types of personal loan that those with poor credit could opt for, including many short term loans. It helps to be aware of all your options when deciding between personal loans.

Secured Personal Loans

Secured loans typically come with a lower minimum credit score requirement because the borrower has to offer valuable property as collateral. Homes, vehicles, or even savings accounts are commonly used to secure these loans. Additionally, depending on your security you may avail of higher minimum loan amounts.

It can be tempting to opt for a secured loan because of the lower interest rates. However, it’s important to carefully consider your need for a loan versus the potential of losing collateral if your circumstances changed and you couldn’t make the repayment terms.

Unsecured Personal Loans

While unsecured loans are popular and most borrowers can qualify, they’re less accessible to those looking for a loan with bad credit. This is because they don’t require collateral, which means repayment terms and rates are determined based heavily on credit scores, income, and debt levels.

If you’re looking to get a personal loan with bad credit, meeting the minimum credit score requirement can be difficult. You’ll likely have to settle for a higher rate for an unsecured loan.

Joint Personal Loans

With a joint personal loan, two parties are responsible for the payment of the loan. They are considered a co-borrower, which means they have equal access to the loan funds and payment information. The lender will take the credit scores of both parties into consideration when offering a loan.

Co-signed Personal Loans

A co-signed personal loan differs slightly, but importantly, from a joint loan. The difference is that a co-signed loan doesn’t involve two parties holding equal responsibility for the loan and shared access to the assets. Rather, a co-signed loan simply means that in the event you fail to repay the loan, your co-signer will step in.

Co-singed loans are a viable option for those with poor credit who know someone with a better credit score who is willing to step in and cover the risk.

Payday Loans

Payday loans have a reputation for being predatory and untrustworthy, and are generally considered as a last option for those who borrow in this way. These are more informal personal loans that often come with extremely high interest rates, but without a credit check.

Payday loans are typically under $500 and are expected to be paid back within two to four weeks, or with your next paycheck. Because the rates are so high—sometimes as high as 400%—this type of loan can quickly get someone into serious debt. So, it’s vital to have a clear plan for quick repayment if you choose to take out a payday loan.

Cash Advances

A cash advance is essentially a type of high-interest short term loan, only it is taken from your credit card issuer. The loan is borrowed from the available balance on your card, and the major benefit of this kind of loan is that you can get cash quite quickly. They don’t require a credit check or loan application. They are also less risky than a payday loan, although still best suited to emergencies.

It’s important to check the terms of cash advances on your particular card. Cash advance fees are often high, as are interest rates and harsh penalties for late payments. Most cash advances are to be paid back within days. So again, they’re an option only if you’re certain that you can make the repayments quickly.

Peer-to-Peer Loans

Peer-to-peer loans are a type of lending popular online, and could be useful especially for those with low credit scores. Also known as marketing lending, P2P loans involves one individual lending to another, without the use of a middleman or financial institution.

Peer-to-peer loans generally offer lower interest rates than most other personal loans. That makes it easier for you to borrow your desire loan amount. But of course, the big downside of having no financial institution involved is a potential lack of security. Make sure to find a secured and reputable lending platform if you choose this route.

Bank Agreements

For customers with a strong relationship with their bank, a bank agreement or overdraft agreement may be a possibility. Your bank may issue you either with a short-term loan, depending on your banking history. They may also allow you to overdraw up to a certain amount.

Bank agreements do come with more attractive terms compared with many unsecured loan options. However, your bank will need to feel confident about your financial history to consider you for one. Contact your local branch and ask about bank agreements to find out if this is an option for you.

Home Equity Loans for Poor Credit

Home equity loans are another type of secured loan, using your home as collateral. If you’ve built up equity in your home, you can borrow up to 80% of its value and receive the loan proceeds in a lump sum.

Home equity loans tend to come with fixed rates and are typically paid long term, from anywhere between five and thirty years. Keep in mind these products are intended for large loans generally used to improve a home.

HELOC Loans for Bad Credit

A home equity line of credit is a type of secured loan. It differs from a home equity loan primarily in that they come with variable rates instead of fixed rates. HELOC loans are also based on the equity of your home and secured by your property, but they work similarly to a credit card. This means you can take out exactly what you need as it is required.

HELOC loans may be available even with a low credit score. They are a popular option for those intending to use their loan proceeds to improve or repair their home.

How to Get a Bad Credit Loan

It’s possible to get a personal loan with bad or no credit. However, by taking the time to work on your credit you could benefit from a lower interest rate and better repayment terms. But, if you have an emergency and can’t wait, here are some tips for finding the best personal loan available to you:

  • Calculate your loan amount: Your first step should always be to get a clear picture of how much you need to borrow. Finding the right personal loan lender and meeting the repayment terms will be much easier if you can be accurate in your estimations.
  • Check your credit score: Make sure you get an accurate record of your current credit score to help you find loan options that are realistic for you. Remember that your credit score is based upon the details within your credit report. So, you’ll probably want to pull up your credit report, especially if your credit score is lower than you expected.
  • Prequalify for loans online: Once you’re sure of your current credit situation, prequalification tools are a great way to check your eligibility with various banks and online lenders. You can check whether you’re likely to be approved for a loan and what rates you might have access to. Additionally, you can do so without having any effect on your credit score.
  • Seek alternative lenders: When your credit score is low, seeking a loan will be much easier if you can find reputable lenders who will consider more than just your credit score. Depending on your financial situation, some lenders may also consider your salary, employment situation, and even your education.
  • Compare loan offers: Comparing numerous loan offers as possible will help you find the best personal loan available. You can sometimes use a quote from one lender to negotiate a better rate with another. However, comparing several lenders will typically lead to a better deal in the long term.

How to Spot Scams for Bad Credit Loans

There are plenty of safe loan options for those with poor credit. However, the reality is that there are also a lot of predatory loan products targeting those with low credit scores. Knowing how to spot the difference between a legitimate lender and a scam is vital.

  • No payments check: A reputable lender will never guarantee your approval for a loan without at least checking your payment history. Most lenders will want to see your credit report, income, and other financial documents to consider your loan application.
  • Fees upfront: While many lenders will require things like an approval or origination fee, these fees are always deducted from the total cost of your loan. If a lender is requesting upfront payment, whether in the form of cash or not, they’re unlikely to be legitimate.
  • Time demands: A reputable lender will never pressure you into making a decision, or taking quick action regarding your loan. Legitimate lending institutes have no need to push you for time. They will always give you the space you need to make your decision, as well as sticking to agreed repayment terms.
  • No physical address: Never deal with a financial institute or lender that doesn’t have a physical address. Even online lenders will be registered to a searchable business address. You should find a physical address for any good lender on their website. This is one of the easiest ways to identify an illegitimate lender.
  • Lender initiates contact: Scammers will often use online platforms to market both poor credit and debt consolidation loans. No legitimate lender will make first contact with you regarding a loan.

Where can you get a loan for bad credit?

Even if you do have a poor credit history, some reputable lenders are still willing to offer unsecured personal loans for bad credit. Just remember, you’re going to be paying a lot of interest on top of the amount you borrow.

It’s always good to check with your local bank or credit union. However, they are likely to have stricter lending standards and a slower origination process. If you have an existing relationship with a bank or credit union, they may be willing to help you out.

Many online lenders offer quick approval and funding, even for borrowers with a low credit score. Just be sure to do your research to make sure the company operates a legitimate business.

Before taking out a bad credit personal loan from anyone, be sure to read reviews and look at the company’s BBB rating.

What to Look for in an Online Lender

The two biggest things to look for with an online lender (especially those who brand themselves as bad credit lenders) are transparency and security.

Unfortunately, the Internet is riddled with scammers and predatory lenders. However, there are several steps you can take to avoid getting into trouble. In most cases, you should also avoid taking out payday loans. The interest rates on payday loans are far higher than other personal loans for bad credit borrowers.

Registered in Your State

First, make sure the lender is registered to do business in your state. You can find this out by contacting your state’s financial institution regulatory bureau.

Secure Website

Make sure the lender’s website begins with “https” rather than just “http”. This indicates a safe, secure site where your personal information can’t easily be compromised.

Transparency

Once you’ve established these two items, next look for transparency in fees and repayment terms. Carefully read all the fine print on the lender’s website.

You should never be asked to pay any fees upfront before receiving your loan funds. In fact, reputable lenders deduct their origination fees from the loan funds, so you never pay anything except your monthly bill.

Credit Bureau Reporting

A final tip is to check and see if the lender reports to the major credit bureaus. It helps to improve your credit score if your timely payments are regularly reported.

Prepayment Penalties

A prepayment penalty is a fee for paying off your loan early. You can also be charged a prepayment penalty for paying more than the standard payment. Obviously, you will want to look out for and avoid lenders that have them.

How does bad credit affect your ability to get a loan?

Before you start looking for bad credit loans, it’s important to get an accurate understanding of your credit score. Most lenders use the FICO scores, which ranges from a low of 300 to a high of 850. A “bad” credit score is typically defined as lower than 629.

If you want to know your exact number, you’ll have to purchase that information from FICO. However, just want to see what kind of derogatory items are on your credit history (and potentially fix them), you can request a free copy of each of your three credit reports.

You should check your reports for accuracy every 12 months even if you’re not actively looking for a loan.

Bad credit can affect you both financially and emotionally. Once you know your credit score, learn more about the impact bad credit can have on your life.

Higher Interest Rates

When applying for a personal loan, the lender will charge you higher interest rates for a poor credit score. That’s because your lender sees you as a greater financial risk, so they charge higher rates in case you default on the loan.

Higher interest rates can really add up over the life of the loan. Keep reading to find out exactly how much.

Unable to Qualify for a Loan

Even worse than getting a high interest loan, you may not qualify for a loan at all if your credit score is too low. If the loan is for something non-essential, then this may not be that big of a deal.

But it can significantly impact your well-being if you have serious financial needs, like car repairs or medical bills. At this point, some people decide to turn to “no credit check” lenders who offer predatory products like payday loans.

Though short-term, these loans for bad credit have extraordinarily high APRs. They often lead people into a cycle of never-ending fees for what started off as just borrowing a few hundred dollars. Luckily, there are many ways to avoid ending up in this situation.

What to Expect with a Bad Credit Loan

When you start looking for bad credit personal loans online, it’s important to know a few different things. First, the worse your credit score is, the higher your annual percentage rate (APR) will be. That includes both your interest rate and often your origination fee.

Don’t be surprised to see bad credit loans with an APR of 20% or more. Unfortunately, it’s also likely that you’ll only have access to lower loan amounts.

If you have really poor credit, you might only qualify to borrow $1,000 or $2,000. Pay careful attention to your actual loan needs and what your monthly payments look like. If it is really going to pinch your budget, it may not be worth it.

This is especially true if your lender requires you to use collateral for a secured loan. That’s how many lenders can offer bad credit loans. They have you use your personal property to secure the loan — whether it’s your car, boat, or savings account. Interest rates will generally be lower on secured loans than they are with unsecured loans.

Defaulting on a Personal Loan

If you default on your personal loan, the lender then takes possession of that collateral to offset the loan cost. This really ramps up the stakes of a bad credit personal loan, so be sure to proceed with caution.

However, if you pay off the personal loan quickly and on time, those regular monthly payments could positively affect your credit history. This will put you on the path to a better credit score (and consequently, better credit offers in the future).

Debt Consolidation

A bad credit loan is not a feasible option for most people to pay off high-interest credit cards as most credit cards already have lower interest rates. But, in some cases, it might make sense.

If your goal is to consolidate debt, the best way to do that is to improve your credit history. Then, you can qualify for either balance transfer credit cards or debt consolidation loans. Getting a debt consolidation loan would allow you to pay off all types of debt, not just credit cards.

How much extra interest should you expect to pay on a loan with bad credit?

Even after getting approved for bad credit loans, there’s no getting around the fact that it’s going to be an expensive decision. Just how expensive depends on the terms and conditions of the loan.

On top of your interest rate, your lender may also charge an origination fee. Unfortunately, this is a pretty universal concept, so there’s not much you can do to avoid paying it.

The origination fee is usually charged as a percentage of your loan amount. So, just like interest, the more you borrow, the more you pay. You don’t have to come up with the cash upfront; instead, the fee is deducted from your loan.

Make sure you account for this deduction in your loan request. For example, if you need a $20,000 loan and there is a 3% origination fee, be sure to request $20,600 because 3% of $20,000 is $600.

Annual Percentage Rate

A helpful tool in determining the best interest rate and applicable fees is the loan’s annual percentage rate or APR. This number helps you compare offers that have different rates and fees to see which is better on an annual basis.

However, APR does not account for the loan term, which is the amount of time it will take you to pay off your loan. A loan may have an extremely low interest rate, but if it takes 10 years to pay off, you might actually end up paying a lot more in interest.

There are many variables to consider when figuring out how much interest you’ll be paying. Let’s look at an example to help put these facts and numbers into context.

Loan Calculator

Want to know how much it will cost you to get a personal loan with bad credit? By using an online calculator, you can determine whether it’s worth paying the extra interest compared to fixing your credit first.

Should you fix your credit before applying for a loan?

If you want to potentially save thousands of dollars on your next loan, then yes, you should consider fixing your credit before you apply. Some components of your credit take time to improve. However, there are many actionable steps you can take right now to improve your credit scores.

It’s always better to get a head start on the process rather than waiting for a financial emergency. If you don’t need the money right away, take the time to fix your credit now so you can save big when you are ready to borrow.

Here are five steps you can take right away to fix bad credit:

1. Dispute any errors on your credit report

Before you attempt to repair your credit, you want to know what you’re dealing with first. So, the first place to start is by reviewing and disputing any errors on your credit report. And checking your report will give you a good idea of where you can begin making improvements.

2. Start making your payments on time

One of the easiest ways to raise your credit score is by making your monthly payments on time. Your payment history counts for a significant portion of your credit history. So, if you struggle to make your monthly payments on time, your credit scores will take a hit.

And you may be surprised to learn that this applies to more than just lending products. It also includes credit cards, personal loans, home loans, utilities, and even your cell phone bill. Once you have that under control, start paying down any existing credit card debt.

3. Lower your credit utilization ratio

Your credit utilization ratio accounts for 30% of your credit score. This means you’re not just judged on how much you owe, but also on how much you’ve borrowed compared to the amount you’re allowed to borrow.

If your credit cards let you borrow up to $10,000 and your balance is $4,000, your credit utilization ratio is 40%. Ideally, your credit utilization ratio should be below 30%. So, try to make extra payments until you can reach that ideal range.

4. Consider using a credit repair service

If you’ve already taken the steps outlined above with minimal success, you may want to consider hiring a professional. A credit repair service can help you dispute any negative items on your credit report. They can often help you improve your credit score faster than doing it on your own. Here is our top choice for a credit repair service.

By law, an item must be removed from your report if the creditor can’t verify it within 30 days. By having a tireless advocate on your side, you’ll make sure your current and past creditors are following the law. They will help you make sure your credit history has been updated to accurately reflect your financial history.

5. Show a lender can you repay the loan

Once you’ve put in the work to raise your credit score, it can help to look for ways to show an online lender, bank, or credit union that you’re able to repay the loan. Providing proof of income can demonstrate to the lender that you’re financially capable of repaying the loan.

If you don’t have any proof of income and your credit score is still lower than you’d like, you can consider applying with a creditworthy cosigner. Ideally, this will be someone who has a good credit history and can vouch for you with your lender.

However, you should only use a cosigner if you’re certain you can repay the loan. If you default on a loan, the bank will go after your cosigner, which will put their financial future at risk.

How can you maintain your credit score once it’s fixed?

After taking the time and effort to raise your credit score, make sure you do everything in your power to keep it up, or get it even higher!

You might not be looking for another loan or line of credit currently, but you never know what your financial future will look like. Perhaps you rent an apartment now, but want to buy a house further down the road.

Getting a Mortgage

It’s hard to figure out how to get a mortgage with bad credit, so do your best to make sure you take care of your credit now. That means paying all your bills on time, setting aside cash for emergency savings, and not racking up unnecessary debt.

Remember, most infractions stay on your credit reports for up to seven years. So, the financial decisions you make now stick with you for a long time.

Renting an Apartment

Plus, think of all the ways poor credit affects your life outside of getting a loan. Many landlords run credit checks on prospective tenants, so it can be difficult to rent an apartment with bad credit.

Potential Employers

Potential employers also sometimes run credit checks on job applicants to see how they handle their money. Why? They think that if you’re not responsible in your personal life, you probably won’t be responsible in your work life.

So bad credit not only affects your spending power, it affects your earning potential as well. Keep every door open by making a conscious effort to continually improve your credit. It would be a huge waste of time and effort to give up on all the progress you just made. Do yourself a favor and consciously manage your money going forward.

Final Thoughts

It’s certainly possible for people with bad credit to get an unsecured loan, but that doesn’t mean it’s the best decision for you. Analyze just how urgent your financial needs are. Then, decide if you can wait awhile to improve your credit before taking out a high-interest loan.

A reputable credit repair service can help you aggressively put your credit score on the fast track to improvement. Check out our credit repair reviews page for a list of reputable credit repair companies that can get you started today.

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