Bad credit loans

Compare bad credit loan options

Having bad credit (630 or less FICO) doesn’t automatically disqualify you from getting a personal loan. Here’s a quick and easy way to compare lenders who cater specifically to people looking at loans for bad credit. 

What’s considered bad credit?

Bad credit is typically a 630 rating or under. Many lenders will provide loans for bad credit but with a higher or maximum APR because of risk. If your loan allows a co-signer, then you may be able to secure better terms while you rebuild your credit. However, if you do convince someone to co-sign, take this commitment seriously. If you default, they’re on the hook for you and it could damage their credit too.

P2P loans or peer-to-peer lending

Peer-to-peer (P2P) lending provides opportunities for borrowers with bad credit.  

Also known as “social lending” or “crowdlending,” P2P connects borrowers and lenders directly with one another online. Interest rates can be high… around 15% or more. Watch out for fees as they can range from 0.5% to 5% of the loan. Late fees can also be expensive if you don’t make your payments on time.

Check out our reviews of lenders that offer personal loans for bad or fair credit.   

• Peerform
• Upgrade
• LendingClub
• OneMain Financial
• Avant
• Prosper

What rate can you expect on a personal loan if you have bad credit? 

Rates vary from lender to lender and depend heavily on your income, credit history, and ability to pay, but here’s a rough guide. 

Pros and cons of a personal loan

A personal loan is an amount of money loaned to an individual typically without any pledged as security for repayment. It’s also generally known as an unsecured loan. Consider the pros and cons before taking any personal loan. To learn more about personal loans visit Roost’s Best Personal Loans article. 

Applying for a loan with a cosigner 

The main reason to pursue a personal loan with a cosigner is that you may be able to qualify for a loan that you wouldn’t receive otherwise. Most of the best lenders allow cosigner loans like LendingClub, LightStream, and Freedom Plus, among others.  If this is an option available to you, it may be a good route to go to get a lower rate while you’re repairing your credit history.  

And, if you have other outstanding loans with high-interest rates, a co-signed loan can allow you to take out a big enough amount of money to pay off your higher-interest loans, bringing all of your debt under one lower interest rate.  However, even with a co-signer, you’ll pay high rates.

Here are a few tips:

• An ideal co-signer has good or excellent credit and collateral to pledge if needed. 
• Get the specifics on the loan and what type of fees or requirements they have for a co-signer. 
• Take the responsibility seriously. If you default or get behind in payments, it affects the credit score of your cosigner, potentially costing them a lot of money. 
• Take into account the personal relationship — is the stress and debt of owing a family member or friend worth the money you’d save on the APR? 

How much can I save in total interest paid with a cosigner? 

When you have a cosigner loan, there is less risk involved for the loan provider, therefore they are able to offer better rates and lower monthly repayments.  

Check out this example where the APR is about 7% less with a cosigner. You save over $1200 in interest over three years. That’s enough for a vacation to Hawaii! 

How do you find a cosigner?

Typically a cosigner will be someone close to you — a parent, sibling, or even an in-law or partner. This can be uncomfortable, and if you default, it’ll likely harm your relationship with them for some period of time. You also want to make sure they’re financially stable and can cover you if you run into difficulties. 

How do interest rates work?

The interest rate is how much the lender charges a borrower for a loan. It is one of the most important factors to consider when shopping for a personal loan. Even one percentage point makes a big difference in the overall amount you have to repay. 

For example, here’s what it looks like if you take a $10,000 loan with an interest rate of 10%. 

It’s expressed as a percentage of the amount borrowed. If you’re consolidating debt and the interest rate is still lower than your earlier loan, then you’re in good shape. If not, you need to examine if the interest rate makes the loan worthwhile for you.

What’s APR?

APR is an acronym for the annual percentage rate and is a better way to compare loans than interest alone because it also includes fees to tell you the total amount it’ll cost you per year. The lower the APR, the less you’re going to pay in the long run. Most bad credit loan lenders charge between 15% and 35.99%.   

For example, here’s what it looks like if you take a $10,000 loan with an interest rate of 25%. 

How to apply for a bad-credit loan  

Step by step: 

1. Compare bad credit loans online to identify a good match for you.
2. Fill out the online application including your reason for the loan and personal information like your credit score range, the amount you want, and your income.
3. Get pre-approved: Based on this information, the lender will do a soft credit pull, which won’t affect your credit rating like a hard credit pull to determine how much to loan you and under what terms and interest rate. 
4. Loan completion: Once your application has been pre-approved you will be put in touch directly with the lender who will need the following from you to finish your loan processing: 
   • Driver’s license or passport
   • Proof of residence (utility bills, rent agreement, etc)
   • Paystub from work
   • Bank account information
5. Get your funds and spend wisely.

Before getting a loan from any lender, it’s important to do your homework and compare a few different lenders. Remember, preapproval isn’t a guarantee of funds until you finish the funding process.  It’s also important to make sure you are taking money from a lender with a good reputation and a solid financial foundation. Check their online reviews, and Better Business Bureau and Consumer Financial Protection Bureau for complaints and scams.