Banking institutions, credit unions, and online lenders have their ways of looking at the capacity of a borrower to pay a loan. One of these ways is to check the borrower’s creditworthiness through his/her credit score. So, if you want to apply for a loan, you should see to it that your credit score is good to exceptional.
But if you have a bad credit rating or Individual Voluntary Arrangement, there’s a way for you to borrow money. Yes, that’s right, there are online lenders that offer bad credit loans. For instance, you can get personal loans for bad credit with Match Financial.
Applying for a bad credit loan doesn’t require you to go through a strict credit check. You can also receive the cash quickly because of this streamlined application process. For you to learn and understand how this loan type works, you better check out this blog article.
Are Online Personal Loans for Bad Credit Legit?
You might think of bad credit loans as a scam. But, no, there are legit lenders that offer this type of loan. And, loan applicants who have bad marks on their credit reports can indeed avail of this loan option.
Online loan providers that specialize in personal loans for bad credit are more permissive when it comes to loan applications. You don’t need to have a good to exceptional credit score to take out this type of loan as long as you have a decent monthly income. It means that you have to submit your recent payslips or bank statements as requirements.
When looking for a bad credit personal loan, make sure that your lender is indeed a legit one because there are people out there that “offer” this loan type just to scam you (so, your first thought isn’t entirely wrong). These scammers levy exorbitant rates and fees from their borrowers.
Even bad credit personal loans have regulated limits on their annual percentage rates and ancillary charges. So, if you think that a lender charges too much, you should report that one to the respective regulatory agency in your state.
Where to Apply for Online Personal Loans for Bad Credit?
You can avail of online personal loans for bad credit from three types of online lenders: direct lenders, loan aggregators, and peer-to-peer loan providers.
As its name suggests, working with a direct lender means that there’s no middleman. The loan transaction is only between you and the lender. You will send your loan application to that lender and receive the funds directly from him/her.
Direct lenders mostly operate their lending business online. But the term “direct lender” can also be applied to banking institutions and credit unions.
Loan aggregators are in partnership with different loan providers to cater to borrowers with poor credit scores. They are middlemen who own websites where people who want to borrow cash can submit their loan applications. Once you send an application, for instance, a loan aggregator will then pass it to different lenders for checking.
The advantage of working with a loan aggregator is that you can increase your possibility of getting the loan because various lenders will look at your loan application. If one loan provider will reject your loan application, it may get approved by another.
Peer-to-Peer (P2P) Lenders
Peer-to-peer or P2P loan providers operate their lending business through a peer-to-peer network. P2P lending has become a popular choice of financing for many borrowers because there’s no intermediary, and there’s the possibility of getting advantageous rates and repayment terms.
P2P lending network or websites connect loan applicants directly to lenders. The application process, receiving of funds, and payments are managed through the network.
If you’re new to this method of borrowing money, you should make sure to do your research about P2P websites that offer bad credit loans. Avoid scammers and fraudulent sites that take the guise of being a P2P lending network.
Does Taking Out This Loan Option Affect Your Credit?
Online personal loans intended for borrowers with poor credit scores can either make or break your credit rating.
Your loan provider will send your debt repayment reports to major credit bureaus for checking. If you make consistent payments on time, you’ll likely receive a good credit score. But, if you miss payments, you may get bad credit marks.
That’s why you should see to it that you pay the loan on schedule to ensure that you improve your credit. Develop a debt repayment plan to motivate you to make consistent monthly payments.
It’s not easy to get approved for a regular loan if you have bad credit. The good thing is that you can find loan providers that offer personal loans for people with poor credit scores. Just make sure that you’re receiving a decent monthly salary to avail of this loan option. Revisit this guide to understand the ins and outs of personal loans for bad credit.