When it comes to paying for some of life’s biggest expenses — a home renovation, a big medical bill, an emergency, a wedding or even a funeral — it can sometimes be easy to find yourself short on the cash needed to cover these costs. And if your savings don’t stack up to the amount of money you’ll need to cover such expenses, you may need to find a way to cover the difference.
This is where a personal loan can be helpful. Personal loans are actually one of the fastest growing debt categories in the U.S., in part because they offer flexibility that some credit cards don’t: lower interest rates and the ability to receive a lump sum of money directly deposited to your bank account so you can use it as needed.
When taking on any form of debt, it’s generally ideal to apply with good or excellent credit in order to score the best loan terms and conditions. But if you find yourself applying for a personal loan with poor credit, there are still options for you — you’ll just need to keep a few things in mind before you begin the application process.
Can you get approved for a personal loan with poor credit?
Your credit history and credit scores are important because they provide lenders with clues to determine whether they think you’ll be a responsible borrower who will pay back the loan on time and in full. Keeping your credit score healthy can really be an asset when you apply for loans for big milestone purchases like buying a home or getting a car.
While it is possible to get approved for a personal loan if you have poor credit, the final decision, for the most part, rests with the lender you apply to. Some lenders will tell you upfront what their minimum requirements are. Payoff Personal Loan, for example, requires a FICO score of 640 (which is within the “fair” range) or higher for approval.
Some lenders will actually cater to those with poor (or no) credit. Upstart Personal Loans, for example, will accept a FICO or Vantage score as low as 600, but they also accept applicants who haven’t built up a sufficient credit history yet. OneMain Financial also approves applicants who have poor or fair credit for their personal loan products. (See our roundup of the best personal loan lenders for bad credit for more options.)
What interest rates do you qualify for?
When applying for any form of credit, the better your credit, the more likely you are to get favorable terms — like lower interest rates. This is also true of personal loans. If you have poor credit, you are likely to receive a higher interest rate on your loan. This means you’ll spend more money paying back the loan.
Of course, the exact interest rate you ultimately receive will depend on the lender’s range, but you can compare personal loans before you submit your application. This way, you can be sure you’re getting the loan with the best terms for you.
Compare offers to find the best loan
When searching for a personal loan, it can be helpful to compare several different offers to find the best interest rate and payment terms for your needs. With this comparison tool, you’ll just need to answer a handful of questions in order for Even Financial to determine the top offers for you. The service is free, secure and does not affect your credit score.
How long will you have to repay the loan?
The amount of time you have to repay a personal loan is often referred to as the loan’s “term.” Much like interest rates and credit score requirements, loan terms can vary from lender to lender. The good news is that this information is generally offered upfront so you can immediately consider if the repayment timeline works for you.
Loan terms can be as short as six months and as long as seven years. When you take on a loan that gives you a longer amount of time to repay the balance, you’ll likely have smaller monthly payments — just be aware, though, that a longer term means you’ll end up paying more in interest over time. Shorter terms, on the other hand, could result in a higher monthly payment but less interest accrued over the duration of the loan.
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