Individuals who have a poor or fair credit score often have a difficult time being approved for a loan. Even if they do get a loan, they are subject to high fees and interest rates. Here are a few important things to know about getting a business loan with bad credit.
What Are Bad Credit Loans?
The FICO credit scoring system is the most popular model that is used to rate a person’s credit. Fair credit is anything from 580 to 690. Poor credit is anything below 579. The five pieces of information that are used to calculate the FICO credit score include payment history, the amount a person owes, the length of their credit history, new credit, and credit mix.
Bad credit loans are available for individuals who have no credit history or those with a less than spotless report. For those who take the time to compare business loans, there are still loans out there with acceptable rates and few restrictions. There are also online services, such as Lantern by SoFi, that allow you to search across different financing options, including SBA programs, small business financing options, and personal loans – all in a single application.
How to Get a Bad Credit Loan
Getting a bad credit loan will require an individual to do diligent research. They need to check their credit score, review their finances to ensure they can pay the loan back, and then compare bad credit loans.
It is also important to see what options are available with secured loans. Those with bad credit often find that these are easier to acquire. Getting a bad credit loan also involves finding out if a cosigner will be needed, gathering important financial documents, and preparing for a hard credit check to be done.
How to Choose the Best Bad Credit Loan Company
There is no one-size-fits-all loan company for those with bad credit. Factors to look at when choosing a loan company include their eligibility requirements, their fees and interest rates, and the repayment terms associated with the loan. There are also various types of lenders, including online lenders, credit unions, and banks. Each has its pros and cons.
Seven Types of Bad Credit Loans
There are seven types of bad credit loans that can be considered. The first is a personal loan, which is a fixed amount loan that is distributed in a lump sum. It is common for these loans to be used to consolidate debt, make a large purchase, or pay medical bills. There are secured and unsecured personal loans.
Payday loans are usually short-term and are used for smaller amounts of money. They have high-interest rates and do not require a credit check.
Other forms of bad credit loans include cash advances, bank agreements, HELOCs for poor credit, home equity loans, and student loans. It is important for a person with bad credit to consider the pros and cons of each of these options.
Best Options
The best option for an individual with bad credit is a loan that offers a low APR and does not charge a fee for applying for the loan. It is important to work with a reputable lender that has designed an application process that is easy to understand.
For those who are willing to do the research, getting a bad credit loan with acceptable rates is possible.