Having bad credit definitely isn’t a good thing, however, it doesn’t make you completely ineligible for an online personal loan. It is likely that will be far harder for you to be approved for a loan as opposed to someone with a better credit history. You will also be more likely to pay a higher interest rate or higher fees for a bad credit personal loan.
Lucky for you, there are several lenders who are always willing to consider applications from people with bad credit, and while it isn’t always certain whether or not you will be approved, it is far more likely with those specific lenders. If you can’t get a larger loan, you may be able to get small personal loans for bad credit which you may be more likely to get approved for due to the smaller amount needed. At the end of the day, the key is to do more research and make the best decision possible for your personal finance.
If you have bad credit, you certainly aren’t alone. There are plenty of things you can do such as recognizing what bad credit actually is, how you can find out if you have bad credit, how you can improve your score, and gaining an understanding of your chances of approval. These are all things that will help you on your way to getting an online personal loan with bad credit.
What is bad credit?
Bad credit is what occurs when someone has a bad history of not paying their bills on time and consolidates debt along with the likelihood that they will fail to make future payments. A person that has bad credit will often find it very difficult to borrow money, especially when it comes to competitive interest rates because they are considered risky due to their history. This applies for all types of loans and also applies to credit cards.
Banks and lenders will usually stay away from lenders with a bad credit score and will continue to be wary of them for plenty of understandable reasons. They aren’t likely to approve loans for people with bad credit due to the fact that there is a chance they won’t follow through with the repayments or will fall behind. Your credit score matters a lot when it comes to buying your first house, buying a car, taking out a loan, and applying for a credit card, so it isn’t something that should be taken lightly.
How did I get a bad credit score?
A bad credit score is a reflection of negative events within your credit history. These negative events include, but aren’t limited to:
- Too many credit checks in a small time frame
- Going bankrupt
- Defaulting/missing loan repayments
- Having credit applications denied
There are plenty of things that can accumulate into bad credit, however, these are among the most common.
How can I improve my credit score?
In the past, credit scores were calculated by only taking the negative events into consideration. Then Comprehensive Credit Reporting (CRR) came long to save the day. This means that when you maintain a positive credit history, you may be able to repair your bad credit score over time. Positive credit events include:
- Keeping your debts manageable
- Fully repay loans
- Keeping up with your repayments
If you keep up with these things, it is likely that you will be able to improve your credit score over time and be able to apply for loans and other things far easier than if you were to keep your bad credit.
Can I get a personal loan with bad credit?
It certainly isn’t as easy as getting a loan with better credit, though it is still possible, especially when it comes to applying for a loan with major banks. In fact, there are some lenders that specialize in approving loans for people with bad credit or people with a bad credit history. One thing to keep in mind is the fact that you will likely be paying higher interest rates or higher fees than typical personal loans accrue due to your bad credit.
People with bad credit may also have to provide additional security to guarantee a personal loan for bad credit. This includes things such as the value of their car or even equity in their home. You need to keep a few things in mind such as the higher interest rates, the rate for approval may be low, and that the likelihood of approval is fairly low.
Chances of approval
Realistically, you have to gain a reasonable understanding of the fact that you may not get approved and that the chances are fairly low for approval when you have bad credit. Every single time you apply for a loan or a credit card, a credit check will be done which leaves a significant mark on your credit file. Then you have to realize that if you get rejected, it could negatively impact your credit score and show on your credit history for up to 12 months.
There are a few things you can do to increase your chances of approval, these things include:
- Reduce credit card debt and the limit on your credit card if it is high
- Have evidence that you have been sticking to a budget
- Save consistently for around three to six months before applying for a loan
- Boost your savings
- Check your credit history and try to approve it as much as possible
If you have bad credit or are having trouble paying for things with bad credit, there are still options available that can benefit you and help you. While bad credit isn’t a death sentence, it is pretty bad, so the best way to deal with it is to try to improve your credit score so that you can have a higher approval rate for online personal loans and anything else that requires a good credit score. Understanding what bad credit is, understanding how you can improve it, and then applying those ways to improve your scores will highly increase your chances of getting an online personal loan!