Find the Best Personal Loan for Your Needs
Defining Good Credit
Most of us need to borrow money at some point of time or the other in our lives because of a number of reasons.
However, borrow we may, but whether we’ll get the loan or not depends on two major factors: Our good credit or bad credit. Any creditor will surely check out your credit history and take a final call on whether he’s going to lend to you or not.
This is principally because it’s his money at stake and he sure needs to determine how risky it is to lend you money. And with bad credit, you might just expect to be rejected right away. This article is all about how to borrow money whether you have good or bad credit.
Good credit is all about your credit history that indicates that you have a relatively higher credit score and are a safe bet in terms of credit risk. Your credit score is provided by accredited and nationally recognized agencies for credit reporting. A lender will always check your credit score before issuing a loan or provide credit.
Classifications of Credit Quality
A credit rating agency assigns a score to you based on your credit history, which credit agencies track by way of a credit report.
However, credit scoring varies according to methodologies applied for calculating your credit score. The FICO Score is the most common and widely accepted credit score. Your score may range between 300 and 850.
When borrowing money, credit scoring is of five types: poor, fair, good, very good and exceptional. If you’re a borrower having an acceptable credit score, you could be in any one of the last three categories.
- Exceptional credit borrower – Has a score ranging from 800 and higher
- Very good category borrower – Has a score that ranges between 740 and 799
- Good borrower Scores between 670 and 739 – Therefore, borrowers with a credit score of approximately 670 or higher are considered good credit score borrowers and have the best chance of receiving credit approval from a lender.
- Fair – Known as a subprime borrower, a fair borrower’s credit score range between 580 and 669
- Poor – A poor borrower is also a subprime category candidate and comes with a credit score of 579 or even less. Even in this category there are personal loans poor credit options available.
Factors Influencing Credit Sores
The question that now arises is: How can I borrow money with bad credit? A borrower’s credit score is influenced by multiple factors.
For anyone belonging to the fair and poor categories to borrow money with bad credit, improving his credit score to move into the good credit category is vital. Though we do talk about the best personal loans for fair credit on another page. A major influencing factor of your credit score is your payment history.
Any defaults on payments surely affects your credit score, remaining like a stubborn stain on your credit report for 7 years. So, you need to make your payments on time so that your credit score improves.
The second factor that helps improve a borrower’s credit score quickly is the amount they owe overall. Their total utilization accounts for 30% of his credit score approximately. If they pay off significant chunks of their debt on a monthly basis regularly, his or her credit score is bound to improve.
The other factors that influence credit scores are:
- The credit history’s length
- The credit type used
- New credit
- Credit inquiries.
A borrower wanting to improve their credit score needs to carefully consider all new credit they accept and also the credit accounts they apply for.
The higher the number of inquiries they make in a short time, the more are the chances of their credit score getting negatively affected and the perceived risk of loan repayment default.
The credit score of a borrower is also significant in influencing the credit type that he is eligible for approval. Conventional lenders prefer quality borrowers generally.
This, in other words, means that those with credit scores of 670 or more get their loan approvals faster. Moreover, they have the additional advantage of getting more favorable terms on their loans than borrowers from lower tiers who have to borrow money from secured credit cards or alternative lenders.
The Importance of Having Good Credit
You can borrow money with bad credit but it sure won’t be easy and/or cheap. That’s why having a good credit score is essential because it gives you the following benefits:
Lower interest rates
In cases of dire emergencies, the first question that comes to the mind of many is: How can I quickly borrow money on my direct express card? If you have a sound credit score, your interest rate for the loan on your card could be relatively lower which means lower finance charges.
This reduces the total loan cost substantially on credit card balances and loans. The less money you pay on interest, the more you have for everything else including repaying your balance.
You have more power to negotiate
Having an acceptable credit score gives you more leverage to negotiate lower interest rates on credit cards or new loans when it comes to borrowing money. Use a personal loan calculator to get an idea of what your payments will be like.
Usually, all leading lenders make offers to you and this could be your bargaining tool to get the best deal. On the flip side, however, borrow money with bad credit becomes more difficult as lenders don’t budge on their loan terms. Moreover, you don’t get the liberty of shopping around.
Your loan and credit card approvals come through faster
As you attempt to borrow money, particularly with a weak credit history, chances are you’ll most probably be refused. However, a good credit score improves your chances of getting loan and credit card approvals greatly.
Approvals for rental apartments and houses come through more easily
Many landlords check credit scores of probable tenants. On top of this, an unacceptable credit score, especially one that’s due to an unpaid rent or eviction severely damages your chances of an apartment rental. Therefore, an acceptable credit score saves you both the hassle and time of getting an apartment on rent.
Higher limits get approved
Your capacity to borrow is purely income and credit score dependant. One such benefit of having a good credit score is that banks and financial institutions are more willing to lend you more money because in the past you’ve paid back on time. On the contrary, with bad credit scores, you can also get a loan approval, but the amount definitely shall be limited.
No security deposits required for getting a cell phone and utilities
Cell phone service providers often don’t give contracts to people with bad credit scores and offer more expensive phones and pay-as-you-go plans.
However, they don’t take security deposits from those with good credit and even offer hefty discounts on contracts on the latest phones. The same thing applies to utilities where deposits may be required at the time of relocating.
With a decent credit score, you may not have to pay anything as security deposit while establishing the service in your personal name or transferring the service to another location.
Better deals on car insurance
A poor credit score leads to higher insurance premiums for cars as auto insurers opine that those with bad credit file more claims.
How To Borrow Money With Good Credit?
Borrowing money on credit cards is common practice but also one of the most expensive options. Interest rates are much higher than those offered by other lenders and about 17 percent on an average. So make your payments timely and borrow money on them by relying on their revolving credit.
Otherwise, only buy things with plastic that you can afford to pay off at the end of the month. Also ensure that you buy those things only for which you can pay at the month end.
Personal loans, also called unsecured loans, need no collateral when it comes to borrowing money. However, their interest rate is higher as compared to home equity loans and they are repayable within one and five years.
The payments, moreover, are automatically deducted from your checking account, thus decreasing the odds of defaults on payments. Generally available up to a limit of $35,000. The average rate of interest is about 11 percent but those in the excellent credit score category can get a rate as low as 5.5 percent.
You could put up your home as collateral to borrow money from banks and financial institutions and this route is taken by most. Home equity may be tapped through a cash-out refinance, which in simpler terms is refinancing a current mortgage with a bigger mortgage or going for a home equity loan.
The latter may be withdrawn as a lump sum amount with fixed interest rates and repayable between five and fifteen years or as a home equity line of credit with a variable rate. The average rate of interest on home equity loans is between 5 and 6 percent.
Borrow Money From 401k
In cases of dire emergencies, you can even tap into your 401(k) retirement account for a loan, subject to a ceiling limit of 50 percent of its current balance, up to a maximum limit of $50,000.
You can even pay back in five years at much lower interest rates. However, it’s also eating into your retirement funds while you miss out on potential dividends, interest income, and capital gains as long as the loan remains unpaid. Also, if you quit your job, the entire balance on the loan becomes due in 90 days.
How Can I Borrow Money With Bad Credit?
Yes, you can borrow money with bad credit, too. You have the option of personal loans usable for any purpose of your choice. Of course, such loans are always bad credit loans but come in handy when you face bankruptcy, foreclosure, repossessions, or any other credit-challenged situation.
These also help establish or re-establish your history of good credit. These loans are good those who require a loan urgently but have been refused as high risk.
Borrowing money online
For locating and getting bad credit loans, scour the Net for lenders who offer these loans specifically. These lenders generally have a bad credit lenders network, lending to those with imperfect credit histories.
An additional advantage of borrowing money online is that applications are simple, free and fast and without major security or collateral commitments. However, the laws governing such loans vary from state to state.
Qualifying for bad credit loans requires the borrower to be at least 18 years of age and being either a US or Canadian citizen. Lenders even give bad credit loan takers credit cards, debt consolidation services, and automobile loans.
The repayment terms may be worked out with the lender in accordance with regular paydays to ensure that the repayment is available on its due date. However, it’s also prudent to remember that before borrowing, you must ensure that you will pay back. Otherwise, you’ll end up getting more into the debt trap and the high risk credit bracket.
Ways to Get Bad Credit Loans
You can still borrow money with bad credit in the following ways:
Know & understand your personal credit score
Knowing your credit score is essential because when you apply for loan options, your 3-digit FICO score is surely going to matter whether you will get approved or not.
So check out your FICO score on the Experian website or ask your bank to provide it for free. It’s also available from FICO albeit at a fee. When it comes to personal loans, a borrower having a credit score above 720 pays an interest rate of around 11-percent on an average typically.
Those with a subprime credit end up paying almost 29 percent or even more! If your credit score is below 550, a conventional lender may not loan you anything at all. That’s the difference.
Avoid payday loans
This is “quick cash” for borrowers with poor credit and they could be dangerous.
The APR rate is a whopping 350 percent or more and these loans trap borrowers with low income in a predatory debt cycle. So avoid them like the plague if you can.
Try and improve bad credit
The absolute truth is that you have to pay more to borrow money with bad credit. So if your credit score is presently low, the most prudent thing to do is to build it up before borrowing money. Staying below 30 percent of the limit on your credit score is one such way.
Consider personal installment loans
In dire emergencies, a good alternative to a payday loan is a personal installment loan. These not only cover emergencies but also help consolidate high-interest debt. However, the lender does not consider your credit score only when evaluating your loan application.
Go for secured loans
A secured loan will help you boost your appeal when you apply to borrow money with bad credit. You are offering a personal asset like a home or car, for example, as collateral.
It convinces the lender that his money is safe because he stands to take possession of the asset on offer to cover his losses if the loan remains repaid. In addition, high-interest, short-term title loans are best avoided. Select the collateral you offer carefully as you may lose it should you default on the payment. Learn more about how to get a secured loan.
Take help from a credit union
Credit unions readily come to the rescue of those wanting to borrow money despite having bad credit. They function like banks and don’t take your credit score into consideration only when you apply for a loan.
However, being a member is mandatory, and you have to convince them to accept you as a member. Your financial position apart, other factors like your place of residence, work, and educational background are also considered before granting membership. Since professional groups form credit unions often, try getting into one if you’re working.
Get a co-signer
Getting a co-signer when you want to borrow money despite a bad credit score is often advisable. This is because the loan’s interest rate is calculated on the co-signor’s credit rating. So get someone having good or excellent credit and who trusts you enough that you will repay your debt.
However, if you default on your payments, your co-signor being equally responsible, stands to suffer also and all payment information gets recorded on both yours and your co-signors credit reports.
Where to Borrow Money Fast
If you're looking to borrow money quickly, it's essential to understand some of the most effective ways to get your hands on fast financing. Let's check out some of your best options below!
New online lenders are able to provide you with an instant loan decision on financing. Their application processes are often very quick as well. Best of all, some can provide you with funding in less than 24 hours after approval. Online lenders often use electronic bank transfers to provide you with the money you need. There are plenty of online loans to choose from.
Peer-to-peer lending platforms allow investors to provide borrowers with money directly. While this isn't the same as a traditional lender, many peer-to-peer lenders offer quick funding. In many ways, their services are similar to that of online lenders. The only downside is that some peer-to-peer lenders charge much higher interest rates.
Friends and Family
While it may be awkward, another good way to borrow money quickly is through friends and family. If you do decide to borrow money through friends and family, make sure you can pay it back. You don't want to ruin relationships over money.
There are now many apps that provide short-term, small loans to consumers in America. While these apps don't provide people with large amounts of money, the can get you a small amount of money very quickly. Some can even load money on to your debit card immediately.
Remember, these apps sometimes have very high interest rates or fees, so we suggest you use other suggestions on this list prior to resorting to one of these apps. Always consider the interest rates attached to the app.
Advertise Services on Message Boards
If you need cash quickly, getting a normal job is probably not the answer. By the time you receive an offer of employment and wait for your first paycheck, it may end up being weeks. If you head online to neighborhood message boards and look for labor jobs, house sitting, pet sitting, baby sitting, or other cash-in-hand work, you're much more likely to get money quickly.
Plenty of neighbors look for cash-based employees close to home. If not, look up events in your area and contact the organizers to see if they're taking on any more workers. This can help you get money much quicker than going through an entire application process.
The Bottom Line
Extensive research has shown time and again that having good credit is the best alternative. A good debtor as the saying goes, “sleeps in peace himself and also allows his lender the same privilege.”
Given the enormous amount of benefits you get when it comes to borrowing money with a good credit score, doesn’t it make sense, therefore, to maintain it always. That way, should a dire need for funds arise, at least you know that you will get a loan from anywhere to tide you over.
After all, you don’t know when life is going to throw the curve at you and the only thing that can save you at that point of time is money.
That’s why if you have a solid credit score to show, at least you know that there’s someone out there to whom you can turn for help. On the flip side, bad credit borrowers needn’t despair either. They have their no credit check loans and safe installment loans to bail them out apart from the choices mentioned above.
If you're looking to borrow money from a lender, the process can be confusing regardless of your credit score. In this section of our website, we take a look at some commonly asked questions we receive about lending and credit scores. We'll also look into commonly asked questions we receive about quick lending and general borrowing. Make sure to check out this page if you have any queries about borrowing from lenders!
If you have bad credit and you're looking to borrow money, the process can sometimes be difficult. In this section of our FAQ page, we take a deeper look at some common questions surrounding bad credit and lending. Check it out below!
How can you borrow money if you have bad credit?
You can borrow money in several ways if you have bad credit. Some lenders may still lend to you if you don't have a solid credit score – it just depends how low your credit score is and what type of income you're working with. If traditional lenders won't work with you, online lenders and peer-to-peer lenders might. Also look for direct lenders for bad credit loans.
Can you get a personal loan with a credit score of 550?
Can I get a personal loan with a 600 credit score?
Some online lenders and peer-to-peer lenders may be willing to provide you with a personal loan – though this will also depend on your income levels and current debt. If you're happy to secure the loan against the value of an asset, this can also improve your chances of finding approval. Securing a loan can also reduce the interest rate that you owe. Veteran personal loans may have different requirements so be sure to get familiar with those.
Can I get a personal loan with a 660 credit score?
It’s hard to judge by simply looking at your credit score. There are plenty of online lenders that accept applicants with 660 credit scores, but you'll also need to factor in your income and other debts to determine if you'll be approved. Each lender has different requirements. You may want to look at a Capital One personal loan too.
How can I get a $5000 loan with no credit?
How can someone with bad credit get a loan?
How can I get a loan with no credit?
How can I get a loan at 18 with no credit?
Can I get a personal loan with no credit?
Which loan company is best for bad credit?
How can I get a loan with no credit?
Where can I borrow money with bad credit right now?
There are little hundreds of online lenders and peer-to-peer platforms that often consider people with less than stellar credit backgrounds. They can also get you money quickly once you're approved. We talk more about the best place to get a loan in a more in-depth article and it depends on the type of load you're looking for.
Can I get a personal loan with bad credit?
If you're looking to get a loan quickly, you'll find this portion of our FAQ page useful. Read ahead!
What is a quick loan?
A quick loan is simply a loan that you receive in a short amount of time. Some people need quick online loans in emergency situations. While in the past a quick loan was typically a loan that took less than week, quick loans can now take less than 24 hours.
How can I get a quick loan?
The best way to get a quick loan is to use an online lender that specializes in fast financing. Many online lenders have instant approval systems in place and can get you money within 24 hours of approval. A DCU personal loan is a good option.
How long does it take to get a personal loan?
Where to borrow money fast?
The best place to borrow money fast is the internet. Many online lenders use automated lending mechanisms that ensure you get the money you need quickly. Some can even get you money within 24 hours. Rise Credit reviews say that they can be fairly quick.
How can I make cash fast?
How to borrow money fast?
If you haven't found the answers to your questions in the above section, you may want to look in our general borrowing FAQs section. Check it out below!
What is the best place to borrow money from?
This depends on what you're looking to borrow. If you're looking to borrow money fast, then you should look to online lenders that can provide you with financing in less than 24 hours. Also if you're wanting a larger loan for home improvements or addons such as a pool then look for companies that quote bigger loan limits on their websites such as Prosper. Read mroe about the best way to finance a pool.
What is the easiest way of borrowing money?
What are the different ways to borrow money?
There are plenty of different ways to borrow money in the modern world. You can use traditional banks and credit unions, as well as online lenders and peer-to-peer lenders. You can even borrow money from your friends. There are even online signature loans from banks.
Why is it easier for a partnership to borrow money?
Who can I borrow money from?
Can I borrow money from my IRA?
Can you borrow money from your 401k?
How to borrow money from 401k?
What is the amount charged for borrowing money called?
What is the cost of borrowing money?
Can I get a loan without a job?
Probably not. Even payday lenders won't lend to people without proof of income. The best way to get a loan without a job is to have an asset that can be used to secure the loan. In the meantime go ahead and check out small loans online just in case there is someone that would approve you. Learn more about how to get a loan without a job.
Which banks offer personal loans?
Pretty much all major banks will offer a form of personal loan to their clients. This includes credit unions and online lenders as well. Usually I go with a Bank of America loan since I bank with the the most.
How to borrow money from the bank?
To borrow money from the bank you can head into one of their branches and request a loan application. Many major banks now allow online loan applications through their websites. This can be easier than heading into a branch. Also consider online loans with no bank account required through some alternative lenders.
How to borrow money online?
Head online and find easy online loans compatible with what you're looking for. You can then fill in a short application. Many online lenders have easy application processes and provide immediate responses.
How to borrow money for college?
What are the ways to borrow money for college?
Can I borrow money from my social security?
Can you borrow money against your house?
How much money can I borrow for a house?
How to borrow money against your home?
How much money can I borrow for a mortgage?
How to write a letter for borrowing money?
How to borrow money from PayPal?
How to borrow money for a business?
Which factor most directly influences how much money consumers are willing to borrow?
Who can borrow money from the Federal Reserve Bank?
When interest rates are high, does it costs less money to borrow money?
No. When interest rates are high, it costs much more money to borrow money. When interest rates are low, you find that consumers borrow much more money. Check out low interest loans online before comitting to the first offers you come across.
How to ask someone to borrow money?
This depends if you're asking a lender or a friend. If you're asking a lender, you typically need to fill out an application form in-person or online. Some lenders may require you to write a letter outlining why you need the money and how you plan on paying it back. Others are not as picky.
If you're asking a friend or family member: tell them why you need the money and how you plan on paying them back. Never ask a friend or family member for money you can't pay it back!
As you can see, there's a lot to learn about borrowing money with good or bad credit. If you want to improve your chances of receiving finance, make sure to understand the industry as much as possible. We also have some other great resources on our site for those who need more information. Check it out!
Christine has a solid background in personal finance as she spent the last eight years working at one of the biggest banks in the US. She managed her own team of financial advisors that helped hundreds of people with their financing needs. Her understanding of different financial products and loans helped her move up the ranks quickly after graduating with a degree in Business Administration.