Learn How to Get a Loan with Bad Credit

Borrowing money can be difficult if you have a low credit score. A low credit score might make getting a loan difficult and expensive. You may be surprised to learn that many reputable lenders have no minimum credit score requirement at all and may instead look at things like your income, debts, collateral, and credit history.

Lenders may consider a borrower to have negative credit if their FICO® Score is below 670. A credit score of 670 or lower is considered “fair” and “poor” by most lenders. Although your borrowing alternatives may be more limited if you have poor credit, it is still feasible to get a loan. The steps are as follows.

1.  Look at Your Credit Reports and Score

You should check your credit score before moving on By visiting AnnualCreditReport.com, you can acquire a free credit report and credit score from Experian, in addition to free reports and scores from the other two major credit reporting agencies (TransUnion and Equifax).

To learn what information lenders use to analyze your loan application, check your credit report. Check for red flags in your credit reports, such as late payments or canceled accounts. The next stage is to make the appropriate adjustments to how you use credit going forward.

For instance, if you see something on your credit report that you think is incorrect (or the result of fraud), you can file a dispute with the relevant credit bureaus. The credit reporting agency will assist the creditor in the investigation and verification of the disputed information. The contested data may be rectified or removed from the database entirely after verification is completed. The challenged entry on your credit report will remain if it is determined to be accurate.

2. Recognize the Price of Bad-Credit Loans

Those with less-than-perfect credit histories often pay higher interest rates on loans. To compensate for the greater risk they are taking by providing negative credit loans, some lenders may impose a higher APR (APR). To illustrate, let’s imagine you’re interested in a $10,000 loan with a three-year repayment term.

• A negative credit borrower may be offered a loan with a 5% origination charge and a 29% interest rate.
• With good credit, you may get a loan offer with an origination charge of 1% and an interest rate of 10%, for a total of $419 each month and $5,086 in interest. For the term of the loan, you will pay a total of $1,616 in interest, or about $323 per month.

The annual percentage rate (APR) of a loan is calculated by adding together the loan’s interest rate, any fees associated with the loan, and the number of years over which the loan must be repaid.

APRs are advertised by many loan providers; the actual APR you’re offered may fall anywhere within that range, depending on factors including your credit history, the size of your loan, and the length of your payback period.

Make sure you can afford the monthly payments on a loan before you apply for one and that you fully comprehend the fees associated. Below, you’ll find a link to Experian’s personal loan calculator, where you can enter your loan details and interest rate to get an estimate of your monthly payments.