5 Best Small Loans for Bad Credit of 2020

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When you find yourself in a difficult financial situation, sometimes a small, short-term loan can be all you need to get back on track. But this can be more challenging if you have bad credit.

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Fortunately, some lenders are willing to work with borrowers that have bad credit. But you need to choose your options wisely because many of these loans can come with sky-high interest rates.

This article will review how you can apply for a small loan when you have bad credit, and five companies to start with.

3 Steps to Apply for a Small Loan With Bad Credit

Applying for a small loan when you have bad credit may feel daunting, but it’s actually a pretty straightforward process. Listed below are the three steps you will take.

Step 1: Check your credit report

Before you apply for a loan, you want to take a look at your credit history. Checking your credit report will give you a sense for where you’re at, and steps you can take to improve your score. If there are any inaccuracies on your report, you can contact your lender or the credit bureaus and ask them to remove the items.

Step 2: Get pre-qualified

If you have bad credit, it’s a good idea to get pre-qualified before applying for a small loan. Pre-qualification is not a guarantee that you’ll be approved when you do apply, but it can help you gauge the likelihood of approval.

And when you get pre-qualified, the lender will run a soft pull on your credit. A soft credit check ensures that your credit score won’t be lowered in the process.

Step 3: Choose a lender and apply

Once you’ve been pre-qualified by several different lenders, you’ll need to compare your offers. When you’re looking at your offers, consider the loan amount, the APR, and repayment terms.

Once you’ve decided on a lender, you can complete the loan application. You may need to provide additional information, like your Social Security number and proof of income. Now you are free to close on the loan and receive access to your funds.

5 Small Loans That Are Good for Bad Credit

If you’re looking for a small unsecured personal loan to hold you over until payday, lending marketplaces are an excellent place to start. The companies listed below won’t lend you the money themselves, but they’ll connect you with a variety of lenders who will.

A lending marketplace allows you to compare offers from multiple lenders and choose the one that offers you the best rates. Listed below are five lending marketplaces you can consider. For all of the options below, you must have an active checking account in your name.

1. MoneyMutual

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MoneyMutual offers short-term loans up to $2,500, and the APR varies. The application takes less than five minutes to complete, and you can receive the funds as soon as the next business day. However, the lending marketplace is not available to borrowers in New York.

Here are the requirements you’ll need to meet to qualify:

  • You must be at least 18-years-old
  • You have a regular source of recurring income
  • You earn at least $800 per month

2. CashUSA

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CashUSA offers loans between $500 and $10,000, with an APR range between 5.99% and 35.99%. The application process is quick, and once you’ve been approved, the funds will be deposited directly into your account.

Here are the requirements you’ll need to meet to qualify:

  • You must be at least 18-years-old
  • You’re a U.S. citizen or permanent resident
  • Valid phone number and email address
  • Earn $1,000 per month after taxes

3. BadCreditLoans.com

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BadCreditLoans.com provides unsecured personal loans between $500 and $5,000 that come with an interest rate between 5.99% and 35.99%. The application process is quick, and the funds can be used for any expense.

Here are the requirements you’ll need to meet to qualify:

  • You must be at least 18-years-old
  • Be a U.S. citizen or resident
  • Valid phone number and email

4. PersonalLoans.com

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PersonalLoans.com provides loans between $500 and $35,000, with an APR range between 5.99% and 35.99%. If you’re approved, you can receive the funds as soon as the next business day.

Here are the requirements you’ll need to meet to qualify:

  • You must be at least 18-years-old
  • You’ll need to provide proof of income
  • No recent bankruptcies or charge-offs

5. CashAdvance.com

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CashAdvance.com provides short-term loans between $100 and $1,000. Consumers with bad credit are welcome to apply, though you do need to have a monthly income of at least $1,000. The approval process is quick, and you can receive the funds by the next business day.

Here are the requirements you’ll need to meet to qualify:

  • You must be at least 18-years-old
  • You must be a U.S. citizen or permanent resident
  • Valid phone number and email
  • Have proof of employment

Lenders to Avoid

If you find yourself in a difficult financial situation, it can be easy to turn to payday lenders. These lenders offer short-term loans for $500 or less, with the payment being due on your next payday.

However, they come with incredibly high interest rates and are not usually worth the financial repercussions. Borrowers that take out payday loans often find themselves trapped in a cycle of debt.

Research from the CFPB found that 80% of all payday loans will be followed up with another payday loan. The loan amount continues to increase over time, and monthly borrowers usually stay in debt for 11 months or longer.

If you’re tempted to try a payday loan, consider the following alternatives first:

  • Try cutting back on your monthly budget
  • Take out a low-cost cash advance on a credit card
  • Borrow money from friends or family
  • Take out a home equity line of credit
  • Look for ways to bring in extra income

Summary

If you’re stuck in a bad financial place and need a little money to get by, it is possible to take out a small loan. Just be sure to avoid predatory payday lenders, so you don’t worsen your financial situation.

Lending marketplaces are a good place for borrowers with a bad credit history to start because you can get pre-approved and receive offers from multiple lenders. That way you can compare your options without hurting your credit scores.

Once you’ve resolved the financial emergency, take a good look at your budget, and make a plan to start saving for an emergency fund. Having some extra savings is the best way to ensure that you don’t find yourself in this situation again.

Jamie Johnson
Meet the author

Jamie Johnson is a freelance writer who has been featured in publications like InvestorPlace and GOBankingRates. She writes about a variety of personal finance topics including student loans, credit cards, investing, building credit, and more.