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When you have bad credit, you may still get a loan when unemployed qualify for loans that can help with emergencies, debt consolidation or home improvements. However, borrowers with poor scores typically face higher interest rates and fees.
Compare options to find the best loans for poor credit with the least impact on your credit score. Also, look for lenders that allow you to add a co-signer or co-borrower to increase your odds of approval and access better terms.
Personal Loans
Personal loans typically require a higher credit score than payday or pawn shop loans, and can be used to pay off high-interest debt, make home repairs or cover unexpected expenses. They also allow you to consolidate multiple debts into a single monthly payment. The best personal loans for bad credit feature low interest rates and flexible loan terms. If your credit scores are too low to qualify for a personal loan, you can improve your chances of approval by applying with a co-signer or by taking steps to build credit before trying again.
To apply for a personal loan, you will need to provide information about your income and desired loan amount. The lender will then run a soft credit inquiry and determine your potential loan rate, amount and repayment term. To ensure you can afford your monthly payments, it’s a good idea to check your credit scores and calculate your debt-to-income ratio before applying.
If you decide to apply, the process can take up to a week or more to be completed, and you may need to provide more financial information. If your application is approved, you will receive the funds within one business day. Many lenders offer online pre-qualification, which allows you to preview potential loan offers before submitting an official application. Upgrade, for example, offers personal loans to borrowers with credit scores as low as 600, and provides direct lender payoff when combining debt.
Student Loans
If you’re applying for a student loan, despite your poor credit, it is worth evaluating the application requirements and eligibility criteria for each lender. Some lenders have a minimum credit score and a preferred debt-to-income ratio, but others might base their approval decisions on a combination of factors, including your school, job and financial history. Look for flexible repayment terms, low interest rates and a lack of prepayment or origination fees. You can also use a student loan calculator to determine the monthly payment you’ll be able to afford. Finally, be sure to prequalify with several lenders to compare real loan offers side-by-side without impacting your credit.
If you’re a graduate or professional student, a PLUS loan is another option for financing your education expenses.
Unsecured Loans
If you don’t have an asset to offer as collateral, unsecured loans (which can be offered in the form of personal or student loans and credit cards) can provide funding even when your credit is poor. However, since lenders take on more risk with these types of loans, they often have higher interest rates than secured loans.
While unsecured loan terms may be tighter, a good credit score can unlock favorable unsecured loan conditions including lower rates and larger borrowing limits. To determine if you qualify, lenders will review your credit history and score, income and employment information.
Depending on the lender, you can choose between revolving debt (credit card) or installment loans such as personal or student loans that require repayment in fixed monthly payments over a set term. Some lenders, such as OneMain Financial, also offer secured loans using an applicant’s vehicle or home equity to guarantee the loan.
Secured loans are a good option for borrowers who want to avoid placing assets at risk, but should be used only when you can be certain that you’ll be able to make the required monthly payments. If you can’t repay your loan, the lender has the right to seize and sell the asset used to secure it. This can have a negative impact on your credit, so it’s important to only use secured loans when necessary.
Consolidation Loans
Debt consolidation loans can help borrowers pay off unsecured debts like credit cards, with a lump sum that’s paid off in fixed monthly payments. These types of personal loans are available for a range of credit scores, and you can often find one with a lower interest rate than what’s charged on your credit cards. You may also be able to save on fees with a debt consolidation loan, such as origination or balance transfer fees.
As with any type of personal loan, be sure to carefully review the terms and conditions before applying. Use a lender comparison tool to narrow your options, and consider the lifetime cost of the loan when making your decision. You can also check your credit score before you apply to get an idea of what the potential impact could be on your credit health.
Remember, while debt consolidation can feel like a relief, it doesn’t eliminate your debt or fix the underlying issue that caused you to fall behind on paying off your debt. If you’re prone to overspending, a debt consolidation loan isn’t likely to be enough of a remedy. A better alternative is to look at ways to change your financial habits and examine why you got into debt in the first place. NerdWallet’s personal loan marketplace lets you compare lenders without impacting your credit.