If you’re in need of some extra funds, but your credit isn’t in tip-top shape, you may be wondering how to get a personal loan and if it’s even possible. The good news is you can get bad credit loans that provide you with the cash you need even if your credit is less than perfect. You simply need to do some research and choose where you apply wisely — and we’re here to help you understand how to do that.
While a personal loan can help you get your finances under control, it is important to note that it may not be the answer to all your financial problems, so getting one should be done carefully.
Here are some tips to help you learn how to get a loan with bad credit.
Gather Your Personal Information
As you think about how to get a personal loan, you can start collecting some information a lender may ask about. Here are two main items to help you get ready to apply for a loan.
The first thing you want to do before you apply for any loan is to understand your credit, as this will give you insight into the details a lender reviews when they pull your credit. (To do this, you can see where your credit currently stands by viewing two of your credit scores for free, updated every 14 days, on Credit.com.) Checking your own credit reports and scores does not affect your credit scores in any way. You don’t need perfect credit to be approved for a personal loan, but your credit scores impact the terms and conditions you’ll qualify for. For example, bad credit loans will likely come with a higher interest rate and may be issued for a lower amount.
If you see your scores are looking pretty lackluster, you may decide you want to improve them a bit before applying for a loan. Some credit score improvement options you may consider include paying down debts, reviewing your credit reports for errors (and disputing any problems you find), and limiting the number of inquiries placed on your credit until your scores rebound (more on that in a moment).
Proof You Can Pay the Loan Back
It’s important to note that lenders will want to know you can repay the loan before they issue it, and the amount they are willing to lend often depends on your ability to do so. It’s a good idea to show how you’ll be repaying them, whether by offering proof of income or a cosigner.
Talk With Your Bank or Credit Union
Next, research minimum credit score requirements for personal loans from lenders in your area. A good place to start is with the bank or credit union you currently use, as they already have an understanding of your financial profile. Something worth noting is that credit unions may have more flexible lending standards and may be more willing to offer you a small personal loan. If you’ve been at the same bank for years, consider reaching out to the bank’s loan department and ask them how to get a loan. You may also want to inquire if your credit scores would qualify you for a personal loan.
Consider Which Loans Are Best for You
Remember when we mentioned limiting the number of inquiries on your credit while you work to improve it? Here’s why: Each loan application you submit triggers an inquiry into your credit, and hard inquiries can lower your credit scores a little bit. So, when you decide to start applying for a personal loan, you’ll want to do your research and likely not apply for every loan you come across.
It’s a good idea to only apply for loans from a lender you trust with lending standards you feel confident you can meet. You may be able to find the minimum credit scores a lender requires for a personal loan on the lender’s website or you can call and speak with one of their representatives.
Be Aware of Scams
There are plenty of online lenders promising loans with no credit check to people who have damaged or bad credit. While this may sound ideal, you want to be cautious. These websites may be nothing more than advance fee loan scams. According to the Federal Trade Commission, a lender who doesn’t seem interested in your credit history is a big red flag and could indicate a fraudulent website.
It’s a good idea to double-check an online lender’s background before applying for a loan. Contact your state Attorney General’s office or your state’s Department of Banking or Financial Regulation to find out if a lender is legitimate and registered to do business in your state. You can also take a look at the Better Business Bureau to see if any customer complaints have been filed against the lenders you’re considering.