Bad credit is about short credit history or a low credit score. Maxed-out credit cards or late payments are some of the things that lower your credit score. Bad credit loans are loans that are available for people with low credit scores. They can be secured or unsecured. For these types of loans, terms, fees, and interest rates vary by lender.
Some lenders have requirements that are stricter than others and this makes shopping around for a suitable lender very important.
How Does Coronavirus Affect Bad-Credit Loans?
Due to COVID-19 impacts, online lenders and banks have adjusted their requirements. Borrowers that already have existing loans can waive fees or defer payments, people looking to borrow in the future may face challenges as the lenders are looking to minimize risk. Some lenders are now offering coronavirus hardship loans and some are changing interest rates.
For people looking to get approved for loans but have low credit scores, they could start their loan search with the bank that holds their savings or checking accounts.
What Is A Poor Credit Score?
According to the FICO credit scoring system, which is the most popular credit score system, scores range between 300 to 850, with 300 being a poor score. A bad credit score, according to FICO ranges as follows;
- Poor credit: 300 to 579.
- Fair credit: 580 to 669.
A poor credit score highly impacts your ability to own a home, rent out an apartment, or get financial assistance from lenders. If you are lucky to get approved for a loan with bad credit, you will be charged higher fees and interests. There are, however, habits that you can develop to improve your credit score, such as checking your credit report to catch errors or paying your bills every month, in full.
What Entails Poor Credit Score?
Your credit score is determined using this information;
- Credit max (10 percent)
- New credit (10 percent)
- Length of credit history (15 percent)
- Owed amounts (30 percent)
- Payment history (35 percent).
If your finances do not reach any of the above areas, your credit score drops. Things like high amounts of debt, foreclosures, and bankruptcies can also result in poor credit scores.
How Do I Qualify For Bad Credit Emergency Loans?
It is possible to get a personal loan with bad credit, but it requires a lot of research to determine the most suitable loan possible. If you have poor credit, you can use the following steps to get a personal loan.
- Checking your credit score-You can request a credit report from AnnualCreditReport.com. Credit reporting agencies provide one free credit report a year.
- Ensure that you can repay the loan- Do an evaluation of your budget and income to ensure you can comfortably pay an additional loan.
- Do a bad-credit personal loans comparison- If your accounts are in good standing, and you have a good existing relationship with your credit union or bank, you may access a personal loan. You can also look for personal loans from online lenders, but be sure to read independent reviews and fine print on the lenders.
- Prequalification- You are allowed by many lenders to check whether you qualify without a hard credit check. This allows you to look for a bad- credit loan without further affecting your credit score.
- Look for secured loans- Secured loans are much easier to get with a below-average credit score. These loans must be secured with assets such as a car or your home. They have lower APRs
- Look for a co-signer- A cosigner takes partial responsibility for your loan and will be required to pay it back in the event that you are unable to. Having a co-signer with good credit qualifies you for lower interests.
- Gather financial documents- To quicken the process of getting a loan, you will need to provide your financial documents such as employment information, tax documents, and pay stubs.
- Be prepared for a hard credit check- Applying for a loan will require a hard credit check, unlike with the prequalification where you can do without one. A hard credit check will result in temporary damage to your credit score but you can always recover once you start paying your loan.
Reach Out To Us Today
Have you been stuck with bad debt for years and don’t know what to do? At Encompass Recovery Group, we provide our clients with advice and financial counseling and will help you come up with strategies to improve your credit score and get out of debt quickly. Reach out to us today at +1 877-769-0109