3 Rules to Know Before Getting a Personal Loan
Before jumping into my picks of the best personal loans for bad credit, I want to talk a little bit about what you should expect, what to look for when choosing a lender, and what to absolutely avoid.
It’s best to do some good background research before you actually apply for a personal loan. Getting a personal loan when you have bad credit is a bit different than when you have good credit. Please don’t jump into a loan application without reading these guidelines first.
Rule 1: Know Your Credit Score Before You Apply
When you apply for a loan, the lender is going to pull your credit score in order to determine if they are willing to extend an offer.
Many people don’t know this, but when your credit is pulled for the purpose of applying for a loan, it will result in what’s called a hard inquiry. Multiple hard inquiries on your credit report will negatively impact your credit score. The mistake a lot of people make is that they don’t know their credit score prior to applying, and therefore apply for a loan they likely won’t get approved for, which results in a hard inquiry.
Avoid this mistake by getting a copy of your credit score prior to applying for any loans. By doing this you can get an idea of which loans you’ll likely be approved for, and which ones you should avoid.
Rule 2: Understand How Personal Loans Work
Generally speaking, personal loans are installment loans which are paid back over a period of time with set monthly payments. In this way they are very similar to auto loans.
Personal loans, however, can be used for just about anything. While many people consolidate their debt by using a personal loan to pay off smaller individual debts, they can also be used for making large purchases.
However, while all personal loans are in theory very similar, there are different types of personal loans that you need to be aware of so you know which one suits your best interest.
The 3 most common types of personal loans:
- Peer-to-peer loans — Rather than borrowing from an individual lender, you will borrow directly from “investors”. This is one of the fastest ways to get a personal loan and usually have good interest rates. However, your credit score will need to be at least 600.
- Personal Installment Loans — With these loans you borrow directly from a lender. This is another really quick way to get a personal loan. After you fill out the application and are approved, the money is directly deposited into your account.
- Bank Personal Loan — As the name indicates, these loans involve you borrowing money from a bank. These loans usually require more time, including a phone interview.
If time is your main concern, I would go with a peer-to-peer or personal installment loan. However, if you want to get the best rates, it’s wise to check out each option. I provide both in My Picks section below.
Rule 3: Know How Bad Credit Impacts a Personal Loan
You should be aware that your credit score is going to impact your personal loan. There lower your credit score, the higher your interest rate is going to be, obviously.
You should also be aware that if your credit score is really bad (under 600), you will also likely run into limits on the amount a lender will lend you. That said, don’t let that stop you from applying, as your individual situation will ultimately determine if you qualify.
Again, my picks below are for lenders who are specifically geared towards people with bad credit, so more than likely you’ll find a loan that fits your needs.
My Top Picks (and why they are the best)
Now let’s get into my top picks. There are literally hundreds of lenders out there who offer personal loans. It can be extremely time consuming to weed through everything and find a reputable lender.
There is also a lot of garbage out there. We see stuff like predatory lending and shady characters in the lending industry all the time.
With that in mind, the picks below are the most reputable companies when it comes to personal loans for bad credit.
PersonalLoans.com is my top pick when it comes to personal loans for people who have bad credit.
PersonalLoans.com is a platform that allows you to fill out a single loan application and they will match you with reputable lenders based on the information you provide.
The Loan Process
Once you fill out the loan application, they will match you with lenders who will fund your loan. Once you’re successfully approved, you will receive your funds in about one business day.
You can expect loan repayment periods being anywhere between 6 and 72 months depending on the loan terms. As for APR rates, they run anywhere between 5.99% and 35.99% depending on your credit score.
The reason why I recommend PersonalLoans.com for people who have bad credit is because they connect with a number of lenders who exclusively work with people who have less than good credit. This is something you won’t see with many other lending platforms.
BadCreditLoans.com is my second pick for personal loans for people with bad credit.
BadCreditLoans.com is also a platform that connects people to lenders through a single loan application process. It’s a very easy process, which is one of the reasons why I recommend it. Once you’re connected with a lender and agree on loan terms, you can get access to the money very quickly.
The main difference between my top pick, PersonalLoans.com, and this service is that it’s specifically created for people who have really bad credit. Therefore, if you have a credit score under 580, I recommend using BadCreditLoans.com.
Did you have a good experience getting a personal loan through one of these services? Let me know down in the comments section! This also helps other readers who are looking at getting a personal loan make a decision.