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Low Credit Score, No Problem: Your Guide to Bad Credit Personal Loans

Moneymagpie Team 5th Oct 2023 No Comments

Reading Time: 3 minutes

Bad credit personal loans are the go-to financing option for people with poor credit scores. The good thing is that such loans have advanced considerably in recent years due to fintech technology. 

Today, it is no hassle finding a lender online who can provide you with a bad credit loan. Moreover, the options before you now are more secure than other bad credit personal loans a decade ago. However, there are still risks associated with such loans. 

So, without further ado, read this article and learn more about bad credit personal loans if you want to borrow money. 

Bad Credit Personal Loans: Defined

Bad credit personal loans are tailored to people with poor credit scores below 575 or 600. Lending companies that provide this financing option do not consider a credit score as the only factor in determining the borrower’s ability and willingness to pay back a loan. Other factors, such as the borrower’s income, can also be an indicator of his means to repay the loan. 

The application process is pretty simple, and you must meet the qualifications. There are several bad credit loan options offered by the lender, and you should select the terms suitable for your financial situation. 

The payment structure for a bad credit personal loan is through installment. You will pay the loan amount and interest over a specified period. For instance, if your total payment for the loan is $2,500, you must pay monthly for a duration of six months. The advantage of this payment structure is you will pay a lower amount monthly until you have paid your total debt. 

The interest rate on a loan for folks with poor credit is usually higher than the rate on a personal loan for people with good credit. The interest rate will probably be higher the longer the loan’s term is. But, even with higher interest rates, personal installment loans are typically cheaper than credit cards or emergency loans. 

Requirement for a Bad Credit Personal Loan

It is vital to provide proof of sufficient income to qualify for a bad credit loan since your lender will not put much emphasis on your credit score. You can get approved for a bad credit loan if your income is stable. Here are the requirements to obtain a bad credit personal loan. 

  • Age 18 years old and above. 
  • Owns a personal bank account
  • Have a sufficient and stable income

If you satisfy the above-mentioned requirements and provide the lender with supporting documents, such as bank statements, payslips, and utility bills, you can get approved for a bad credit personal loan. 

Advantages of Getting Bad Credit Loans Online

Some traditional banks may advertise that they provide bad credit personal loans. However, if you want some advantages, you can apply for such a loan online. These reasons will further convince you to choose an online bad credit loan. 

You Have Higher Chances to Get Approval

If you have a low credit score, your chances of getting approved if you apply for a bad credit loan at a traditional bank are lower. But, if you go to an online lender, you will have a higher chance of getting the loan since online lenders are not strict on requirements. 

However, beware of online predatory lenders. According to ACORN, many Canadians with low to moderate income do not go to banks when they want to borrow cash, making them susceptible to dishonest online lenders. 

Faster Loan Application Process

Online lenders are faster when processing loan applications because they are using financial technology. Of course, this is advantageous to borrowers. 

The lender will require supporting documents, which you can upload through your online application. The lender can deposit money into your bank account immediately after approval. The funds will be available to you when you need it most.

Disadvantage of Bad Credit Loans

Paying interest is the consequence of borrowing money. Many bad credit loans come with high-interest rates that may put a borrower into a debt cycle. This is true with emergency loans and credit cards offered by traditional banks. 

In contrast, online loans usually have fixed repayment terms and lower interest rates. An online bad credit loan allows you to pay off the loan amount in a specific number of payments first, and next is the interest. The installment structure will lower the payment every month.

If your goal is to get a lower interest rate, be sure to improve your credit. Lenders will easily approve your application if your credit score is high. 

Final Thoughts

Typically, borrowers with poor credit scores cannot get a personal loan from traditional banks. But thanks to online lenders, you can now get approved for a personal loan even if you have a low credit score. If you have a stable income, you can avail of a bad credit personal loan from an online lender.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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