Have you been denied a personal loan by a bank?
There are plenty of lenders that offer loans to people who have bad credit, but those loans are not without strings. Before you sign up for one of these loans you need to know what you are getting into. Our guide acts as a starting point to help you research if you are making a good decision.
Here is a breakdown of what is considered a bad credit rating, the risks of bad credit loans, and what your other options are.
What is Considered a Bad Credit Score?
When you apply for a personal loan, lenders will look at one of two major credit rating systems, FICO or VantageScore. If your credit score falls into the “very poor” or “poor” ranges, you will be charged significantly higher interest on loans, or may be denied altogether.
Read our full guide on what is considered a good credit score for more information on how these scores are calculated.
FICO Score Rating System
| Credit Score | Rating |
| 300-579 | Very Poor |
| 580-669 | Fair |
| 670-739 | Good |
| 740-799 | Very Good |
| 800-850 | Exceptional |
VantageScore Rating System
| Credit Score | Rating |
| 300-549 | Very Poor |
| 550-649 | Poor |
| 650-699 | Fair |
| 700-749 | Good |
| 750-850 | Excellent |
Where Can I Get a Loan With Bad Credit?
If you have been denied a loan from a bank, many credit unions and online lenders offer personal loans to people with bad credit.
What is a Credit Union?
A credit union is a nonprofit financial cooperative where all customers own part of the union. This ensures all profits made by the union can be passed on in the form of better rates and better loan terms. Each credit union will have membership requirements you need to meet before you can join.
What Should I Know About Online Lenders?
There are plenty of lenders online who will offer you a loan with bad credit. These lenders may want to review your finances or employment history before offering you a loan.
Do The Benefits of a Bad Credit Loan Outweigh the Risks?
If you have bad credit, you are considered a high risk for repaying a loan. As a result, you can expect high-interest rates, particularly from online lenders.
That being said, you can save money in the long run if you use a personal loan to pay off higher interest debts. A loan from a credit union or an online lender will still have better terms than a payday loan.
To see if taking out a bad credit loan is the right move, first research the lender to make sure they have a positive reputation. Then consider the terms of the loan:
- Annual Percentage Rate (APR): The APR is the interest rate on the loan expressed as a yearly figure. The higher the APR, the more you pay in interest.
- Loan Repayment Period: How long you have to pay off the loan, given that you always make your monthly payment.
- Monthly Payments: How much you are expected to pay back each month on the loan.
Bad credit loans have higher interest rates than other personal loans. You will always want to make sure you can make your monthly payments or your debt will skyrocket.
What About No Credit Check Loans?
Have you seen offers for “guaranteed loans” that require no credit check? No matter how badly you might need money, there are huge risks associated with these loans.
Consider this: the whole reason credit ratings exist is to assess how likely you are to repay your loan. If a lender is choosing to not check your credit, they are not doing it out of the kindness of their heart. Chances are their repayment terms and their interest rates are designed to keep you in a dangerous debt spiral.
While many states are cracking down on predatory loan practices, shady lenders are still finding ways to get around new laws. Repayment is often demanded quickly, and extending your loan incurs a costly fee. There may be legal caps on their interest rates, but they can charge you interest more often than a standard loan, still amounting to hundreds of percent.
No matter how confident you are in being able to repay a loan, there are safer options out there.
What Other Options Do I Have if I am Denied a Personal Loan?
If you are eligible for a credit card with a low-interest rate, this can be an alternative solution to a bad credit loan for the short term. You might also be able to take out a line of finance.
Looking at the big picture, you will want to get your credit score back up to get better options for loans, credit, and financing. Maybe you have been struggling with getting out of credit card debt. Or it could be that your credit report is suffering from errors or a series of hard checks on your credit.
To find out if you are eligible for credit repair, contact us at RepairCreditQuick. We will provide you with a free credit report and free consultation with a financial expert who will discuss how they can get your credit rating back up.
We only work with the top-rated credit repair specialists in the country. Don’t wait, contact us for your free consultation today.