Bad Credit Loans

If your credit report is far from perfect, it may be hard to qualify for a personal loan.

Bad credit loans are similar to personal loans. Borrowers pay back the loan amount in monthly installments with interest. It's common that bad credit loans are short-term loans for an emergency financial situation. They can be unsecured or secured loans.

Borrowers with bad credit typically have low FICO credit scores. High amounts of credit card debt, late monthly payments, and poor repayment history can all be reasons for a bad credit score. If you're not sure why your credit score is low, obtain a copy of your credit reports from the three major credit bureaus.

When financial institutions run a credit check, they review your credit history to determine your creditworthiness. Lenders may also review a borrower's bank account history and debt-to-income ratio.

When searching for a loan, look for lenders that offer prequalification. This means that the loan lender has done a soft credit check on your credit report. A soft credit check shows up on your credit report, but does not hurt your credit score, unlike a hard credit inquiry.

Generally, borrowers with good credit or excellent credit have access to loans with lower interest rates. They'll also have the most loan offers to choose from, as well as favorable repayment terms and loan rates.

Lenders generally view individuals with a low credit score as risky borrowers, so your loan options may be limited. Some online lenders and credit unions may offer you a bad credit loan at a high interest rate with less favorable loan terms to compensate for poor credit history.

Payday loans, title loans, cash advances, and an emergency credit card can also be loan options for those strapped for cash. Typically, these types of loans don't require a hard credit check, but they can end up being costly to borrowers because of high interest rates.

A lower-cost option for borrowers with bad credit may be to ask someone trustworthy with good credit to be a co-signer. Using a co-signer with excellent credit on your loan application can help you secure a lower interest rate and loan term. During the application process, the lender will consider your co-signer's credit score and credit history process to help make a decision on whether to fund the personal loan.