Got bad credit? Need money fast?
You’re in good company. 16.3% of American consumers have very poor credit scores. Odds of being approved for a loan? Virtually zero. At least, that’s what it feels like.
But before you throw in the towel…
Bad credit doesn’t equal no options
Lenders exist who will work with people who’ve experienced some financial hardship. The trick is knowing where to look, what to avoid, and how to improve your odds of approval.
In this guide we’ll cover:
- Bad Credit Loan Options
- The Other Factors Lenders Look At
- Strategies To Improve Approval Odds
- Predatory Lending Warning Signs
Bad Credit Loan Options
Traditional banks usually aren’t your friends when it comes to bad credit loans. They’ll reject your application out of hand faster than you can blink.
But does that mean there aren’t options?
Not at all. Bad credit loans come in all shapes and sizes. Some lenders go to great lengths to help people rebuild their financial lives, while others ruthlessly prey upon desperate borrowers.
The difference?
Knowing which lenders you can trust and which to run from like the plague.
Borrowers seeking personal loans specifically for bad credit have some great options out there that can help without trapping you in a never-ending cycle of debt. Lenders who understand that past financial mistakes don’t have to dictate your future and who are willing to look at more than just your credit score.
After all, right now approximately 24.2 million Americans have personal loans, and many of those borrowers started with bad credit but were able to find the right lender for their needs.
The Other Factors Lenders Look At
Want to know a little secret?
Your credit score isn’t the only factor that lenders look at. In fact, responsible lenders that work with bad credit borrowers look at a whole host of other things.
They’re interested in:
- Regular employment that provides a steady income
- Ability to demonstrate you can afford the monthly payment
- Checking account or savings account in good standing
- Employment history showing time at current place of work
Essentially, lenders want to know you can pay them back. A bad credit score from five years ago matters a lot less if you’re in a stable financial situation right now.
Some lenders will even take alternative information into account such as rent payment history or utility bill payment history. The data you provide helps them see patterns that credit scores may miss.
Strategies To Improve Approval Odds
Alright. You know a little more about where to find bad credit loan options and what lenders will actually look at beyond credit scores. How do you make sure you get approved?
Answer?
It’s not about gaming the system. It’s about making yourself the best borrower you can be right now.
Start small
You don’t need to borrow $10,000 if you only need $2,000. When you have bad credit lenders are more likely to approve a lower loan amount for a borrower. Once you demonstrate you can repay a smaller loan amount, higher dollar amounts will be available to you in the future.
Consider adding a co-signer
Co-signing with someone with good credit can dramatically improve your odds of approval. A co-signer is someone who essentially vouches for you and agrees to make the payments if you can’t.
But here’s the kicker… You need someone who trusts you enough to take that risk. And if you start missing payments you’ll be hurting your co-signer’s credit as well.
Look into secured loan options
Secured loans use collateral like a car title or savings account to secure the loan. Because there’s less risk to the lender, you’ll have better odds of approval and a better interest rate as well.
The downside? If you’re unable to repay the loan you’ll lose whatever you put up as collateral.
Shop around and compare
Every lender has different requirements and different interest rates. Some lenders are specializing in bad credit personal loans, while others focus on certain niches such as low income or recent bankruptcy.
Shopping around to compare lenders helps you ensure you find the best rates available to you. Most lenders offer prequalification that won’t ding your credit score.
Time your application carefully
Apply when you’re at the most stable place financially. Just got a new job? Wait a few months to demonstrate consistent income. Paid off a debt recently? Give it time to show on your credit report.
Predatory Lending Warning Signs
Not all lenders are created equal. Some predatory lenders target desperate borrowers with bad credit and prey upon them ruthlessly.
Watch out for these warning signs:
Lenders that promise approval before even looking at your information are lying to you. No reputable lender in their right mind will guarantee approval to every applicant.
Upfront fees are another huge red flag. Legitimate lenders deduct their origination fees directly from your loan proceeds. They don’t charge borrowers money before they approve the loan.
Interest rates above 36% APR are considered predatory by most consumer advocacy groups. Bad credit means you’ll pay higher interest than people with excellent credit, but there’s a difference between higher and highway robbery.
Pressure tactics from lenders should send you running. If a lender is pressuring you to sign immediately or telling you not to compare offers, run like the wind.
Payday Loan Scams
Payday loans may sound like the easy solution when you’re in a bind. Get the cash you need quickly with minimal requirements.
But the APRs they charge are insane. We’re talking 400% and above in many states.
Payday loans are a debt trap designed to keep you borrowing. Most people can’t pay off the full amount with their next paycheck so they roll it over and pay more fees.
Avoid them unless you have absolutely no other choice, and even then make sure you have a rock solid plan to pay off the entire amount immediately.
Making Your Loan Work For You
Being approved for a bad credit loan isn’t the finish line. It’s the first step on the road to better credit.
Every payment made on time is the fastest way to build your credit back up. Set up automatic payments whenever possible. It removes the risk of you forgetting to make a payment. Plus most lenders will give you a small rate discount for enrolling in autopay.
Pay more when you can. Even an extra $20 when you’re able to throw at the loan principal each month will reduce the total interest you pay and get you off the loan faster.
The goal isn’t just to get a loan and be done with it. It’s to use that loan to start on a path to better financial health.
Your Path Forward
The options for bad credit loans do exist for people who find themselves in a tough spot financially. But it’s how you approach the process that makes the difference.
Focus on finding a lender who specializes in bad credit and has reasonable terms. Use strategies like starting small or adding a co-signer to increase your odds.
Most importantly? Avoid predatory lenders that promise one thing and deliver a debt trap instead. There are plenty of lenders out there who want to help you, not take advantage of you.
Get the loan you need with the right lender and use it as a tool for building toward better credit. That’s the difference between a smart borrowing decision and a desperate one.
Final Thoughts
It’s not as hard as you might think to figure out how to get approved for a bad credit loan. Once you know where to look and how to approach the process your odds skyrocket.
Every on-time payment you make starts you on the path toward a better credit score. Every loan that you successfully repay is one more door that opens to better terms next time you need a loan.
Take your time, do your research, and work with lenders that are there to help you rather than take advantage of you. Your credit situation today does not have to dictate your financial life tomorrow.
