When your credit score dips below the 580 mark, it can feel like the financial doors have been slammed shut in your face. But it’s not the end of the road. Even with a credit score in the bad credit range, lenders are willing to provide loans. Here, we explore four viable options for personal loans that cater to applicants with a credit score of 580 or lower, detailing their features, requirements, and why they might be right for you.
Personal Loans to Apply for With a 580 Credit Score
1. Secured Personal Loans
A secured loan requires you to put up an asset as collateral. This could be a vehicle, a piece of property, or a savings account. Lenders are more willing to offer loans with collateral on the line because it reduces their risk.
- Advantages: Lower interest rates compared to unsecured loans and higher loan amounts might be available.
- Disadvantages: Risk of losing the asset if you default on the loan.
- Best for: Borrowers who have assets to use as collateral and are confident in their ability to repay the loan.
2. Payday Alternative Loans (PALs)
Offered by many credit unions, Payday Alternative Loans are designed to provide a better option than costly payday loans. To qualify, you usually need to be a member of the credit union for a certain period (often a month).
- Advantages: Lower interest rates compared to payday loans, and you do not need a good credit score to qualify.
- Disadvantages: Loan amounts are often smaller, typically ranging from $200 to $2,000.
- Best for: Borrowers needing small amounts of money quickly and who can repay the loan over a short period.
3. Bad Credit Personal Loans
Some online lenders specialize in lending to people with bad credit. These loans are unsecured, so no collateral is required.
- Advantages: No collateral required; quick disbursement of funds.
- Disadvantages: Higher interest rates due to the increased risk to the lender and potentially unfavorable loan terms.
- Best for: Borrowers with poor credit who need fast access to cash and have no collateral.
4. Co-Signed Loans
A co-signed loan involves getting someone with a better credit score to sign the loan agreement with you. The co-signer agrees to repay the loan if you are unable to, which decreases the risk for the lender.
- Advantages: More likely to get approved with a co-signer’s good credit, potentially lower interest rates.
- Disadvantages: Puts financial strain on the relationship if you fail to make payments.
- Best for: Those who have a willing family member or friend with good credit who can co-sign.
List of Lenders Offering Personal Loans for Lower Credit Scores
OneMain Financial
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- Overview: Does not have a minimum credit score requirement; offers secured and unsecured loans.
- Typical APR: Higher than average due to the risk associated with lower credit scores.
- Loan Amounts: Generally between $1,500 and $20,000.
Avant
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- Minimum Credit Score: Typically around 580 or higher.
- Typical APR: Ranges from approximately 9.95% to 35.99%.
- Loan Amounts: Usually from $2,000 to $35,000.
LendingPoint
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- Minimum Credit Score: Around 585.
- Typical APR: From about 9.99% to 35.99%.
- Loan Amounts: Between $2,000 and $25,000.
Upstart
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- Minimum Credit Score: 600 (slightly higher, but they consider other factors like education and job history, which might help those close to 580).
- Typical APR: Ranges widely based on creditworthiness.
- Loan Amounts: $1,000 to $50,000.
NetCredit
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- Overview: Offers unsecured personal loans with no prepayment fees; tailored for borrowers with bad credit.
- Typical APR: Varies greatly; can be very high.
- Loan Amounts: Typically from $1,000 to $10,000.
OppLoans
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- Overview: Focused on bad credit borrowers; does not typically perform a hard credit pull.
- Typical APR: High due to the risk of lending to people with poor credit.
- Loan Amounts: Usually between $500 and $4,000.
Local Credit Unions
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- Overview: Often offer payday alternative loans (PALs) which are more affordable than conventional payday loans.
- Requirements: Membership in the credit union, which typically involves residing, working, or worshipping in a specific area.
Evaluating Your Options
When considering personal loans with a low credit score, it’s crucial to evaluate interest rates, fees, and terms offered by different lenders. Also, consider how the repayment schedule fits with your financial situation. Making timely payments can help you build your credit score while defaulting could worsen it.
Before applying for a loan, it’s advisable to shop around and compare offers from multiple lenders to find the best rates and terms available to you. Additionally, consider working on improving your credit score to broaden your options and secure more favorable lending terms in the future
FAQs on Bad Credit Loans
Can getting a loan with bad credit make my credit score worse?
Taking out a loan can impact your credit score positively if you make timely payments. However, if you miss payments or default, it can negatively affect your score.
Are there any quick tips for improving a credit score before applying for a loan?
Yes, try paying down existing debt, especially credit card balances; make all current payments on time; and check your credit report for errors that you can dispute.
How high are interest rates on bad credit personal loans?
Interest rates can vary widely based on the lender and the specific circumstances of the borrower. Typically, rates can be quite high, often well into the double digits.
Is there a benefit to choosing a secured loan over an unsecured loan with bad credit?
Yes, secured loans typically come with lower interest rates because the lender has less risk thanks to the collateral. They may also offer larger loan amounts.
What should I do if I am unable to get a loan due to my low credit score?
Consider asking for a co-signer, looking into loans from credit unions, or rebuilding your credit before reapplying. Additionally, some financial advisors may provide guidance tailored to your specific situation.
Conclusion
While a credit score of 580 or lower isn’t ideal, it doesn’t completely bar you from accessing financial products. Whether it’s through secured loans, PALs, loans tailored for bad credit, or using a co-signer, options are available. By carefully considering each option and choosing a loan that you can realistically repay, you not only meet your immediate financial needs but also take a step toward rebuilding your credit
