Credit scores are not forgiving. They are brutal numbers that take forever to build up and can easily plummet as a result of one simple mistake. There are methods to receive loans when needed even if you do not have a great credit score.
You may not need a huge loan, but a small loan is still hard to get approved for without a favorable credit score. This article will go into detail and tell you how to get small loans for bad credit.
What is considered a small loan?
A small loan is often categorized as a loan that amounts to $3,000 or less. These tend to be personal loans for paying bills, fixing vehicles, making household repairs, or utilizing as credit builders. Believe it or not, small loans are used very frequently.
How can I get a small loan with bad credit?
Traditional banks may turn you away if you have bad credit, but there are multiple other ways that you can get a small loan with bad credit. The reason it can be difficult is that lower credit scores mean that you are a riskier borrower, but it’s still possible.
The lender has to make sure they will get their money back. To make sure you pay back the money you owe, lenders will increase the interest on your loans.
So, you can still get a loan, but you will just have to pay more in interest. If you are hesitant about applying for a loan, check out this article about guaranteed loans.
What makes a good small loan?
Small loans have a variety of different terms involved, but the specifics will depend on the lender. Some lenders charge a flat fee while others charge a big interest rate. Learn about the different possibilities before taking the plunge. Here are a few things for you to consider.
How long are you planning to take to pay off your loan? Your exact timeline will depend on what the reason for the loan is, but making sure that it doesn’t go unpaid for too long is very important.
Oftentimes, the longer the length of the loan, the larger your interest rate. Also, make sure that they aren’t making you pay it back too fast because that will make everything a lot more stressful for you.
When doing your research and trying to decide which lender to choose, make sure that you choose a lender who will help you build your credit. There are many lenders out there who don’t help build your credit, which is a waste of your time. You are trying to build your credit, so these lenders will not help at all.
If you currently have a bad credit score, then the odds of you having enough cash flow to support your day-to-day life are small. Monthly payments can be pretty steep, so talk with the lenders and make sure they can guarantee that the payment will not increase overtime.
Which type of small loan is best for you?
Small loans have a variety of differences. Choosing which one works best for your situation is a difficult choice. It all depends on what you need the money for. Below are 8 options for you to consider when picking out a small loan.
If you took out a loan for a car, then that car is the collateral. If you have a mortgage, then your home is the collateral. Secured loans use collateral as a means to pay the loan if you should default. But not all loans require collateral.
The interest rate or finance charges will increase if your loan is not collateral-based, like an unsecured loan. Typically, to qualify for an unsecured loan the lender takes a closer look at your financials and credit score.
Payday loans often cost a few hundred dollars. These are high-interest, risky loans. Payments are not paid on a monthly basis, but on the borrower’s next payday. These kinds of loans will catch you in a debt cycle as it may be difficult to repay the first loan and keep up with the interest payments.
Chat with the lender and ask them what rates they offer. Also, ask if the rates are fixed or variable. A fixed-rate means that it is going to be the same rate throughout the payback period.
A variable rate has the potential of adjusting either up or down, but most likely, it will go up. Variable-rate loans often start out lower than fixed-rate loans. However, a variable rate loan isn’t the best option if you are looking for predictable payments and lower risk.
Lease to own
Depending on what you are looking for, you could consider a lease to own. Some lenders will directly help poor credit scores with purchases of essential items, such as furniture, tires, or TVs. This is a payday alternative if you need to buy something from a retailer.
MoneyLion Credit Builder loan
MoneyLion has a Credit Builder loan that will help you increase your credit score, which is perfect for those with bad credit scores. This loan actually avoids hard credit inquiries, eliminating the small dip when you go through a loan approval. It has been designed to create better saving habits when it comes to money, too.
Instacash is awesome. This is a cash advance tool, just like a payday loan, but it comes with no interest attached. It has a 0% APR interest rate meaning you won’t pay any interest on the money you borrow.
Small loans for the win
Banks are brutal when it comes to low credit scores, that’s why MoneyLion created a financial platform to help those who have credit challenges get back on track. When you download the MoneyLion app, applying for a MoneyLion Credit Builder Loan and establishing healthy credit is only a few clicks away!