If you need to cover an unexpected expense, a personal loan can be helpful. But if your credit is rocky, it could be challenging to get funding. Fortunately, you have options, even if your credit history isn’t perfect.
Here’s where you can find a bad credit loan and some things you can do to qualify for one.
- Where to find a bad credit loan
- Online lenders
- Credit unions
- How to qualify for a personal loan with bad credit
Lenders want to know how you’ve handled debt in the past, so they look at your credit score and credit history to predict how likely you are to repay a loan. While having bad credit can make qualifying for a personal loan challenging, it’s not impossible. Some lenders work specifically with borrowers who have a shaky credit history or no credit at all. But to offset their risk of lending you money, lenders charge higher interest rates to borrowers with bad credit.
If you’re looking for a bad credit loan, visit Credible to see your prequalified personal loan rates from various lenders, without affecting your credit.
One of the most convenient options for a bad credit personal loan is through an online lender. You can complete the entire process, from application to approval, without meeting in person. Some lenders may require a phone call, but you can apply for and accept your loan in your pajamas.
- Convenient — You can apply for a loan from anywhere you have an internet connection.
- Lower interest rates — Many online lenders offer slightly lower rates if they don’t have the overhead of maintaining a brick-and-mortar location.
- Fast — Many online lenders offer quick application decisions and funding times. You may get your money in as little as one to two business days, though some online lenders offer to fund your loan as soon as the same day you apply.
- No in-person service — Customer service won’t happen in person with an online lender. While you may get a phone call or two, you’ll primarily be working on your application and documents online.
- Fewer discounts — Many banks and credit unions offer loyalty discounts on their loan products to existing customers, but you might not be able to find this type of discount with an online lender.
- Harder to qualify if you’re self-employed — If you run your own business, you may have difficulty qualifying for an online loan. You’ll need to provide additional documentation when you apply, like tax returns and several years of income statements.
Banks are popular for personal loans, especially for customers who already have accounts with a specific institution. While some banks offer online applications, you may be able to have a more-customized experience by visiting a loan officer to apply in person.
- In-person service — Getting a personal loan from a bank allows you to talk to a human. Working face-to-face can make it a little easier to qualify for a loan since the loan officer can consider your individual circumstances.
- May be able to save on interest — If you take out a loan with a bank you already have a relationship with, you may be able to get a lower interest rate. You can also easily set up automatic payments.
- Peace of mind — You won’t have to submit personal information online.
- No prescreening option — You may not be able to check possible interest rates without affecting your credit score.
- Longer processing time — Banks may take a little longer to process your loan and distribute your funds.
- May not be as willing to work with lower credit scores — While working directly with someone can be helpful, some banks don’t offer loans to borrowers with bad credit.
Credit unions are another option for personal loans. A credit union operates similarly to a bank but often has membership requirements. Credit unions are not-for-profit, member-owned cooperatives. Unlike banks, members get to vote on board and bank issues.
- May be more accessible as a member — If you have an existing credit union account, it may be easier to qualify for a loan, even with a lower credit score.
- More personal — Credit unions provide loans to other members with funds from current members. Credit unions are often local to the community, so you’d be keeping funds where you live.
- Lower fees and interest rates — Credit unions can offer lower rates and costs due to the structure of their lending process.
- May be exclusive — Most credit unions have membership requirements, and you typically have to be a member in order to apply for a loan. You may also be required to maintain a minimum balance in your savings account.
- Fewer locations than banks — Credit unions often have fewer locations, so you might have to travel a bit further to meet with a loan officer.
- May have fewer bells and whistles — As not-for-profit institutions, credit unions might not offer the latest banking technology. Your account access options might be more limited than with a bank or online lender.
When you’re ready to apply for a bad credit personal loan, you can make the application process more manageable with some preparation. Documents you’ll need include:
- Proof of income, such as pay stubs and tax returns
- Proof of employment, such as W-2s
- Proof of identity
- Bank statements
- Cosigner information (if you choose to use a cosigner)
- Small-business documents if you’re self-employed, including bank statements showing deposits
- Proof of address
If you have bad credit, here are a few things you can do to improve your odds of qualifying for a personal loan:
- Ask someone to cosign. Ask a friend or family member with excellent credit to cosign your loan. This can increase your chances of being approved, and of getting a lower interest rate.
- Apply for a secured loan. Consider applying for a secured loan, which will require you to provide an asset as collateral, such as a car or savings account. You should only do this if you’re confident you can maintain your payments, as you could lose your collateral if you default on the loan.
- Consider multiple loan options. Would you qualify for a smaller loan? Are you willing to pay a higher interest rate? Compare rates and terms from multiple lenders so you can find an option that works best for you.
Qualifying for a bad credit loan might be difficult, but you do have options if you’re willing to do a little work.
Credible lets you quickly and easily compare personal loan rates from various lenders, all in one place.