Having bad credit can make getting approved for a personal loan more challenging but not impossible. Today there are more online options that specialize in lending to borrowers with poor credit by considering alternative qualifications beyond just credit scores.
What is Considered Bad Credit?
You are generally considered a bad credit borrower if your FICO score falls below 580. Typical score ranges include:
– Very poor: 300 to 579
– Fair: 580 to 669
– Good: 670 to 739
The main factors bringing scores down are late payments, high balances compared to limits, collection accounts, bankruptcies, and tax liens.
Online Lenders That Accept Bad Credit
Looking beyond mainstream consumer lenders opens up more possibilities for loan approval despite low scores. Options to explore include:
Peer-to-Peer Lending
These online marketplaces let individual investors provide funding. Loan decisions involve looking at your full financial picture. Interest rates are competitive.
Payday Alternative Loans
Meant to replace risky payday loans, these short-term loans range from about $200-$1,000 with terms under 12 months. Rates are capped, but fees still add significant costs.
Subprime Installment Lenders
This fast-growing segment focuses specifically on bad credit consumers. They provide higher loan amounts and longer terms than payday alternatives but also very high interest rates.
Getting Approved
The online loan process is quick and convenient. After a five-minute application, you get an instant initial decision. Once approved and all terms accepted, funding into your checking account completes in 1-3 days.
Be prepared to provide personal details like your employment, income, monthly housing payments, and banking information. Fees and restrictions will apply with bad credit.
Alternative Qualification Factors
The following factors can offset low credit scores for online lender approval:
– Steady verifiable income source
– Consistent paycheck deposits
– Long employment history
– Past quick loan payoffs
– Owning a home
Meeting minimum monthly income levels is also a common requirement despite bad credit. For larger loans above $5,000, income requirements may get steeper.
Frequently Asked Questions
Q1: Will taking out a bad credit loan improve my credit score?
A: If you make all payments in full and on time, responsible use of installment loans can help scores gradually improve. Quickly paying off payday alternative loans helps even more. But only obtain what you can manage paying back based on your budget.
Q2: Can I get approved with no credit history at all?
A: Yes, some specialized online lenders consider factors like income stability and housing payments. Rates are higher without an established score but on-time payments let you build positive history.
Q3: How do I find the lowest interest rate with bad credit?
A: Unfortunately loan options are limited for borrowers with very low scores below 580. But still compare alternative online lender rates to find the lowest options. Avoid payday loans with 400%+ rates.
Q4: Is there a minimum credit score to qualify?
A: Each lender sets their own minimum score threshold for approval likelihood. But many now focus specifically on borrowers with scores as low as 300. Shopping rates lets you see personalized options.
The Bottom Line
Despite having very poor credit, specialty online lenders now make access to lower rate installment loans easier. Apply for pre-approval to view your chances and applicable interest rates.