Your credit score is one of the most important factors when applying for a loan. If you are thinking about applying for a loan and your credit rating is low, you might be wondering if you have a chance of getting approved.
You can get a loan with a credit score of less than 650. Typically, the credit score you need for a personal loan is 550 or higher. It depends on the lender because each has their own minimum requirements. Also, keep in mind that lenders tend to offer smaller loans and charge higher interest rates to borrowers with lower credit scores.
Although it will cost you more, it is possible to get a loan even without a high credit score. Now let’s see how you can find a lender and get the loan you want.
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How To Get A Loan With A Credit Score Below 650
Here is the process for getting a loan with a credit score below 650:
- Check your credit score
- Look for lenders with a minimum credit score that you can meet
- Compare loan rates with lenders you find
To begin with, you need to know your credit score. Specifically, you should research your FICOÂ® score, as it is the most widely used score by lenders. There are several free ways to get your credit score online.
Ascent’s selection of the best personal loans
Are you looking for a personal loan but don’t know where to start? Ascent’s choices for the best personal loans help you demystify the offers available so that you can choose the one that best suits your needs.
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The next step is to find potential lenders. You can do this by looking for the best personal loans for fair credit. Under the FICO scoring system, fair credit includes scores from 580 to 669. If you are looking for consumer loans with fair credit, you should find lenders with minimum requirements that work for your credit score.
Once you have the lenders, it is time to go shopping for rates. Most lenders have a prequalification option on their websites. Once you have entered some basic information, the lender performs a gentle credit check on you, which does not affect your credit score. It then tells you the loan amount and the interest rate for which you are prequalified.
Use the loan amounts and interest rates offered to choose a lender. After choosing one, you can apply for your loan.
Other Ways To Get A Loan With A Low Credit Score
There are other loan options that may work better depending on your situation.
Get a co-signer
Some lenders allow consumers to apply for personal loans with a co-signer. A co-signer is another person who agrees to be responsible for your loan.
If you know someone with a higher credit score than you who is willing to co-sign your loan, this could help you get better loan terms. The lender will use the co-signerâs credit to determine the interest rate and the amount they can offer.
Check with your bank or credit union
When you already have a relationship with a bank or credit union, they may be willing to give you a personal loan with no credit or with a low credit rating. They have a better idea of ââyour financial situation compared to a lender that you have never used before. If they see that you have a steady income and are managing your money well, this could be your ticket to your loan.
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Want to pay off your debts faster? Check out our list of the best personal loans for debt consolidation and lower your monthly payments with a lower rate.
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Provide collateral for a secured loan
Personal loans are generally unsecured loans, which means that the lender has nothing to take back in the event the borrower defaults. But it is possible to get a personal loan with collateral. This can facilitate approval.
When you provide collateral for your loan, it is a secured loan. Most valuables that can be professionally appraised are an option to use as collateral. Common warranty choices include:
- Bank accounts
- Investment accounts
Save money on your loan
A good rule of thumb to follow with personal loans is not to borrow more than you need to. This is even more important when you have a low credit score due to the higher interest rates.
First determine how much money you need. And then only borrow that amount, even if the lender offers you more.
The length of your loan is also important. A longer loan term means lower monthly payments, but it also comes with higher interest charges. Choose the shortest term that’s right for you to minimize interest without having trouble making payments.
If you choose the lowest loan amount and the shortest term that you can handle, your loan will not be more expensive than it needs to be. It may cost you interest, but you will have the money you need and it may even improve your credit as you pay off the loan.