Is It Possible to Obtain a Personal Loan With Subprime Credit?
These days, borrowers can get great rates from lenders for personal loans. Because fewer Americans miss their monthly payments and more people are requesting them, it's a fantastic time to get a personal loan. Not only borrowers with excellent credit can take advantage of these good financial times. Some lenders currently offer people with bad credit personal loans, too.
The majority of Americans have subprime credit scores. As a result, many more lenders will give these borrowers an opportunity to get loans of small amounts. This type of unsecured loan (loans in which you do not have to put up any collateral) is what are known as "signature loans." A signature loan typically goes to borrowers with bad credit. They get called signature loans because the lender does not check the borrower's credit and a signature is all that is needed to obtain the funds.
If you're looking to get a personal loan with bad credit, note that the application process may take longer than if you had an excellent credit score. Lenders have to look into your credit history to see what exactly caused your low score. For example, do you have outstanding medical bills, but you still pay your mortgage and car payments on time? Do you have a bankruptcy on your report but it first occurred years ago? If you have some positive indications of healthy financial activity on your credit report, you can often find a lender that will give you a personal loan. However, if your credit history indicates that you have new outstanding debts, this could act as a blemish on your loan application.
You Can Use a Personal Loan to Raise Your Credit Score
You can use a personal loan to boost your credit score if you have a subprime credit score. Your lender will tell the credit bureaus about your payment history regarding this loan. So if you make all of your payments on time, your responsible payment history can lead to a higher credit score.
What If My Credit Score Is Too Low to Qualify For a Personal Loan?
Some borrowers may find that their credit score is too low to be eligible for a personal loan from a lender initially. In this case, the lender might require you to add a co-signer to the loan. The lender sees your co-signer as a person who is as much on the hook for the repayment of the loan as the original borrower. With a default, any late payments will show up on both your credit report and that of your co-signer. You might also need a co-signer if your credit score is sufficiently high, but your income indicates that you will have trouble easily repaying your debt.
Borrowers with bad credit may also see a possible unsecured loan turn into a secured one. This means that they will have to put up an asset such as a car, home, or money in a CD (certificate of deposit) before the funds get distributed.