Finding the Best Loans for People with Bad Credit
When it comes to getting a loan, there is no question that having a high credit score and a clean credit history makes things a lot easier. However, far more people have average, fair, or even bad credit as opposed to a good score. Does this mean that getting a high-quality loan is impossible? Absolutely not! There are many different lenders who specialize in loans for people with bad credit!
That being said, not every loan is created equal! Terms can vary wildly from one type of loan to another, and finding the best poor credit loans involves knowing your options. Don't be intimidated. Knowledge is power and by doing some research and understanding the full array of lending options available, you will have a much better chance of finding a loan that works despite your current credit score and offers reasonable terms that make the monthly payments affordable.
Seeing Your Options at a Glance
When it comes to getting an unsecured loan for people with bad credit, options are going to come in two types of forms: specialized lending institutions and peer to peer lending websites. While there are more than five total options, between these two types of lending choices there tend to be five names that do come up over and over again.
If you start your search for a reasonable loan despite poor credit with these following five choices, you're sure to find at least one that simply will not disappoint. This is why knowing the best loan companies for bad credit is such an important part of the process!
|Company||Year Founded||Poor credit score loans?||Total loans given out||Bank or P2P?|
|Lending Club||2006||Yes||Over $15B||P2P|
|One Main Financial||1912||Yes||N/A||Bank|
|Prosper Loans||2005||Yes||Over $6B||P2P|
What Matters Most to You?
When it comes to finding the best bad credit loans you actually qualify for, it's important to always be looking at the terms. How long do you have to pay the loan back and are those monthly payments affordable? Is the due date strictly enforced each month or do you have a moving window before a penalty is assessed on the account? There are several things you need to look at to make sure you're getting the best deal.
You may want to look at this video to learn more:
#1: What's the Overall Interest Rate?
This should be the number one question on your mind. Obviously the lower the interest rate on the loan, the better off you are going to be overall. However, since we are talking about poor credit loans, you're not going to get the absolute best rates. That doesn't mean you should settle for bad terms.
These higher rates even apply to different loans that both fall under the umbrella term of being "poor credit loans." Someone looking for a 500 credit score personal loan is going to have fewer options and probably not as good terms as someone looking for a 600 credit score personal loan because even when looking at bad credit, those 100 points and what they represent still matter. If you're on the higher end of "poor credit," you should absolutely use that to get the best terms possible for yourself.
#2: What Are the Fees?
Every loan is going to have fees for various things. What is the opening fee for getting the loan? Does the loan have an additional fee for each payment processed? What about late fees – how strict are they with these and what is the penalty for being a day or two late? There is no necessary industry standard that you can go by. Every single lender is going to have their own terms and their own conditions.
Understanding what fees are a part of the loan and when they are going to be added on is the responsibility of the borrower. While the lender can't hide fees or alter the contract after it's agreed upon, fees will be listed and it is up to the borrower to understand the terms of the loan and what fees they might be required to pay at some point.
#3: What Are the Terms?
Do you know what the terms of your loan are? There's no question that some terms are simply better than others. Is the payment due date on a certain day every single month, no exceptions? Do you have two or three days as kind of a floating due date? That's an important detail to understand, especially if the terms of your loan have late fees that get tacked on immediately if a payment is even a few minutes late.
You need to know every single term of any given loan. This includes closing costs, any disbursement fees, late fees, and the full interest rate. There are some bad credit loans where the APR actually changes and grows depending on if a payment is missed or late – which can turn a reasonable loan into one where the terms aren't nearly as friendly. Don't underestimate the importance of knowing the terms!
Bad Credit Loan Reviews: The Companies You Need to Know!
In business since: 2012
Amount of loans: Over $1 billion
Avant specializes in loans for people with poor credit, and there's a reason their name comes up again and again when discussing the best available options. They might be relatively new on the scene, but they have proven they know how to dig into the details past a single (often unfair) number that makes up the credit score. One of the details that jumps out immediately is that they don't charge an initial origination fee. That is obviously a huge plus since it means there isn't a large chunk of the loan taken out during the time of disbursement.
Another nice feature is how online friendly the company is, allowing people to select their state, look up their credit score, and get an idea if they qualify (or not) and if they do, what the terms of the loan will look like. That's a very transparent view of the process and it is winning many fans who see Avant as offering the best bad credit loans out there right now and you can learn more by looking at our Avant review.
In business since: 2010
Amount of loans: Over $7 billion total funded
Peerform is a peer to peer (p2p) lending network that was founded in 2010 to fill two obvious needs. One was on the borrowing side, to provide individuals with a way to get money for themselves or their small business while the banks weren't lending, and the other was to offer a way individuals could invest their money and get a return. A savings account offering 0.75% interest isn't going to do it for most people.
Peerform allows people with money to invest to put it up to fund loans for people who need a loan but can't get one from more traditional means. The interest rates offered will vary based on each borrower's credit history, debt to income ratio, and a variety of other factors but interest rates for borrowers start at around 7% and go up from there. Among peer to peer lending options that specifically focus on giving people with poor credit a shot, Peerform is hard to compete with. It is one of the best peer to peer lending options for bad credit.
#3: Lending Club
In business since: 2006
Amount of loans: Over $15 billion
Lending Club, not to be mistaken with the similarly named Lending Tree, is a U.S. based peer to peer trading network that offers individuals the chance to invest by funding the loans for other individuals, thus taking up the role of a bank or lender in the process. Lending Club specializes in personal loans up to amounts of $40,000 and they are one of the most respected and well recognized p2p players in the United States.
While their focus isn't as heavily based on the best loans for people with bad credit, they don't automatically discount people with poor credit, either. This is a true p2p company and it is still worth looking to see if this might be a legitimate way to get a loan. Bad credit loans do make up a decent amount of the total amount of loans that are funded here.
#4: OneMain Financial
In business since: 1912
Amount of loans: Unknown, over 2.4 million total customers
OneMain Financial is an interesting case because they have a reputation of being one of the few banks out there willing to consistently take a chance on giving personal loans to individuals who have a good income or show a solid history but maybe don't have a great credit score. They've even frequently been mentioned as a decent competitor to clear favorite bad credit lenders like Avant Financial.
However, OneMain Financial is also being absorbed by Springleaf Financial. While normally this should make people nervous who have needed bad credit loans in the past, and might need them again in the future, in this particular instance it shouldn't be too much cause for alarm since Springleaf was also known for providing personal loans to people with fair or poor credit.
While anyone with a poor credit loan from OneMain will want to keep an eye on this merger and how this might affect future loans, there's little doubt that the new much larger Springleaf Financial will still continue to offer some quality choices when it comes to offering loans to people with a bad credit history. Take a look at our OneMain Financial review to learn more.
#5: Prosper Loans
In business since: 2005
Amount of loans: Over $6 billion
Prosper Loans is another example of an established peer to peer lending network that offers plenty of opportunity to individuals who have less than perfect credit. See a trend forming here? When it comes to getting a personal loan financed, peer to peer lending is thriving by offering that person funding person connection that many banks have ignored for a long time, and Prosper Loans is one of the largest p2p players out there.
While they don't focus solely on bad credit loans, Prosper Loans offers loans for a variety of credit scores and many borrowers have found funding here when every other option feel through. The 5.99% advertised isn't going to be available to people who don't have outstanding credit scores, but there will be loan options that are at a higher (though still reasonable) price for people at all credit score levels.
Bad Credit Frequently Asked Questions (FAQ)
Everyone is going to have their own questions when it comes to finding good bad credit loans, but here are just a few of the most common almost everyone in that situation will have at one time or another.
What's the difference between secured and unsecured loans?
Many individuals with poor credit looking for a loan will have to deal with secured loans, which is a loan where collateral is put up in case re-payment isn't made. Home loans and loans for new cars are prime examples of this. An unsecured loan is one where no collateral is put up for the loan, and is more common with smaller personal loans for people with higher credit scores. However, something like a bad credit auto loan is a secured loan that is often easy to acquire.
What are the best loans for bad credit scores?
This is really going to depend on each individual person's situation. Even among bad credit scores there's a big difference between a 500, a 600, and a 625. Other factors like current income, past history of paid bills, and debt to income ratio are measured differently by different lenders. This makes it extremely important to shop around and see what your best rates are. You may find a situation where 4 lenders turn you down, one gives you a loan on poor terms, but another gives you a better loan on great terms. Situation matters when it comes to learning how to get a loan with a bad credit score.
Can anyone with a bad credit score get a loan?
Unfortunately, no. While there are a variety of options for most people who have credit score issues, there are cases where there simply might not be any open funding. If you don't have income, have a lot of currently late bills, or have been through bankruptcy recently, it might be next to impossible to find a lender who will take the risk in that situation. However, it never hurts to go out there and apply just to see what your options might be when you're looking for personal loans for bad credit.
Are there private student loan options for people with bad credit?
There are very few students who won't be able to find student loans for their schooling. There are many options when it comes to private loans for education, even when looking at student loans for bad credit. You may need to take some time to
Should I go with a traditional lender, or trust peer to peer lending?
This is a tough question and unfortunately there isn't a solid answer. The truth is you should go with whatever lender will give you the best interest rate and the best overall terms and conditions. These are what will determine what loan is going to be the best for you (and your pocket book) - regardless of who the lender is!
When it comes to finding the best loans for people with bad credit the good news is that there are many options. Thirty years ago it was banks or nothing, and good luck if you were facing a bank that refused to look beyond the credit score. With online companies offering peer to peer lending and people able to get multiple quotes from banks across the nation, there have never been more options when it comes to getting a bad credit loan. This is important whether you're looking for a personal loan or a business loan for bad credit, you want to know all your options.
Do your homework, pay attention to those terms, and you will love the final result when you have a good loan with solid terms.