No matter how well you think you’ve prepared, life has a way of throwing curveballs sometimes. If you’re facing an emergency or other unexpected expense, you may need to take out a loan — and fast. But what if you have bad credit?
Even with a lower credit score, it’s still possible to take out a loan to cover emergency expenses — it just might require a little extra work. Here’s a look at how hardship loans for bad credit work and how to find a lender that offers hardship loans.
If you’re looking for a hardship loan, Credible lets you compare personal loan rates from various lenders in minutes.
- What are hardship loans for bad credit?
- Where can you get a hardship loan for bad credit?
- 5 lenders that offer hardship loans for bad credit
- How to apply for a hardship loan for bad credit
- Will getting a hardship loan affect your credit score?
- Pros and cons of hardship loans for bad credit
- Hardship loan alternatives
Hardship loans — also called emergency loans — are exactly what they sound like: personal loans intended to help borrowers get through an unexpected or sudden financial hardship. This could be a medical emergency, covering rent or mortgage payments following a job loss, paying for funeral expenses, or funding an unexpected home or car repair.
A hardship loan for bad credit is an installment loan that’s available to borrowers with a low credit score. These loans aren’t technically any different from other personal loan products. But taking out a hardship loan usually means finding a lender that offers a quick application and funding process.
What’s considered a bad credit score?
The Fair Isaac Corporation (FICO) Score is the most commonly used credit-scoring model. While FICO has different versions of its scoring model, the FICO Score 8 is the most common.
A FICO Score below 580 is considered poor, while a score of 580 to 669 is considered fair, or below average.
Depending on the lender and the credit-scoring model it uses, a credit score that falls into the fair or poor range will make it more difficult to take out an installment loan because it could indicate that you pose additional risk to a lender, and may not be able to repay your loan as agreed. A score of 600 or below may make getting approved for a loan even more challenging.
Hardship loans for bad credit are available through a number of different financial institutions. Several online lenders offer loans to borrowers with lower credit scores. You may also have luck applying through a bank or credit union where you already have an established relationship.
You can compare personal loan rates online with Credible, and it won’t affect your credit score.
It may be difficult to qualify for a personal loan with bad credit, and there may even be specific risks to consider. But some lenders work specifically with low credit borrowers, which may make it easier to get approved for the hardship loan you need.
These five Credible partner lenders offer hardship loans, each with a credit score requirement below 600:
- Loan amounts: $2,000 to $35,000
- Minimum credit score: 550
- Funding time: As soon as the next business day (if approved by 4:30 p.m. Central time on a weekday)
- Loan amounts: $2,000 to $36,500
- Minimum credit score: 580
- Funding time: As soon as the next business day
- Loan amounts: $1,500 to $20,000
- Minimum credit score: None
- Funding time: As soon as the same business day (though you may be required to visit a local branch)
- Loan amounts: $1,000 to $20,000
- Minimum credit score: 560
- Funding time: Within one day of approval
- Loan amounts: $1,000 to $50,000
- Minimum credit score: 560
- Funding time: Within one day of approval and loan verification
If you need a hardship loan to cover an emergency expense, the application process is relatively straightforward. Where you choose to apply for that loan, though, can make all the difference — especially if you’re trying to get a hardship loan with a bad credit score. Follow these steps to apply for a hardship loan:
- Check your credit. Knowing whether or not you actually have a bad credit score is the first step to applying for a loan. By checking your credit first, you’re able to see what could be affecting your credit, and whether any potential errors could be bringing your score down even further. If you find an error, dispute it with the credit bureau or the reporting creditor.
- Get prequalified with multiple lenders. Some lenders will allow you to prequalify for loan products before finalizing your application. This process uses a soft credit pull (which doesn’t hurt your credit score) to determine your eligibility for a loan with that lender. By getting prequalified with multiple lenders, you can see who’s likely willing to approve you, what sort of interest rate you might be offered, and you can save yourself some unnecessary hard credit inquiries.
- Compare loan offers. As you’re looking over loan prequalification offers, it’s time to do some comparison shopping. See which loan meets your needs first, in terms of loan amount, funding time, and even the repayment term. Then, look at how much that loan will cost you, both in interest and other applicable fees.
- Apply with the lender you choose. Once you find the winning lender, you can proceed with your official application. This usually involves providing certain documents (like pay stubs, proof of employment, and proof of identity) and often includes a hard credit pull, which can temporarily lower your scores a few points. Depending on your credit and how much you want to borrow, you may need to add a cosigner to the loan. Adding a cosigner who has good or excellent credit can help increase your chances of approval and may even snag you a lower interest rate.
- Sign your loan documents and receive your money. If your application is approved, you’ll sign your final loan documents — this is where you promise to repay the loan as agreed. Your lender will then fund the loan — depending on which lender you choose, this could be as quick as the same day or may take a few business days to complete.
If you’re ready to apply for a hardship loan, visit Credible to easily compare personal loan rates.
Needing a hardship loan is difficult enough. Finding a lender that’ll approve you with a bad credit score can be even tougher. But applying for a hardship loan that you know will affect your credit score further? Ouch.
Put simply: Yes, getting a hardship loan will affect your credit score. Applying for and taking out a hardship loan can lower your credit score initially because multiple factors go into calculating your score, including:
- How much you owe
- Any new credit accounts
- Your payment history
- The length of your credit history
- Your credit mix
You’ll get at least one new hard inquiry during the application process, which can cause your score to drop by a few points. Adding a new loan account will also increase your total amount owed and reduce the length of your average credit history.
But as you pay off that hardship loan, each of these factors can improve. Over time, it won’t be a "new" account anymore, and will increase your average age of accounts. If you make your payments on time, your positive payment history can help build your score, and your score can gradually improve as you reduce the balance you owe.
Like any financial product, hardship loans have important pros and cons to consider — especially if you’re a borrower with bad credit:
- They can be used for nearly any expense. A hardship loan is simply a personal loan that you use to cover a financial hardship. If you’re approved, you can use those funds toward nearly any expense.
- They can be quick. Many personal loan lenders offer funding as soon as the same business day, whether you need $5,000 or $50,000. This is especially helpful if you have a sudden or emergency financial need.
- They can give you access to cash. Not all expenses can be paid with a credit card, and credit cards may also come with additional payment processing fees. Personal loans are typically deposited as a lump sum into the account of your choosing, giving you the flexibility to spend how and where you need.
- They can be costly. Personal loans come with added expenses, which may include interest charges, origination fees, and other costs. This can add up over time, especially compared to using money from a savings account or other source.
- They have eligibility requirements. Even though hardship loans for bad credit are available, most lenders still have borrower requirements of some kind. If you don’t meet those requirements, you may need to add a cosigner or you may not be approved for a loan.
- They can lower your credit score. Taking out a hardship loan can lower your credit score, at least initially. Depending on how you manage your loan repayment, though, your score could quickly recover or even improve.
If you have bad credit, you may decide that a hardship loan isn’t the right option for you. Here are some alternatives you may want to consider:
- Look into financial assistance programs. Depending on your situation, where you live, and even where you work, financial assistance programs may be available. These programs could be provided by your employer, your city or county, or even as a federal or state offering.
- Borrow from family or friends. It can be uncomfortable to ask relatives or friends to lend you money, but if you’re facing financial hardship and have loved ones who are willing to help, this could potentially be the best option. You may still want to consider drawing up a contract, and be sure to discuss each of your expectations for the arrangement beforehand to avoid straining the relationship.
- Use a credit card. Credit cards can be a useful financial tool for emergencies and unexpected expenses. You may be able to find one that offers a 0% introductory APR on purchases or balance transfers (though you typically need good credit to qualify for this type of card). But if you don’t pay your statement balance in full by the due date, credit cards can also be costly since they tend to have higher interest rates than personal loans.