Origination fee: You’re more likely to come across this fee if you’re dealing with an online lender, and it’s usually calculated as a percentage of your loan to cover the costs of processing or underwriting your loan.
Prepayment penalty fee: While it may seem like a good thing to pay back your personal loan early, some lenders charge a fee for doing this. That’s because they make less money in interest when you repay your loan early.
Returned check fee: If your payment doesn’t go through because you have insufficient funds in your bank account or you bounce a check, you may run into a returned check fee. This is typically a flat amount.
Every financial product comes with advantages and disadvantages, so it’s important to weigh the benefits against the costs to determine if a personal loan is good for your needs. Here are some pros and cons to consider when it comes to personal loans for bad credit.
If a bad credit personal loan is too expensive, it can make it harder to pay all your bills on time
Tips for comparison shopping for a personal loan
When shopping for a personal loan, it can be helpful to compare multiple offers to make sure you’re not overspending. To comparison shop for loans, you should request loan estimates from multiple lenders and then compare the estimates by looking at how much you’ll pay in fees, what your repayment terms are, what the rate type is (adjustable or fixed), and how high your APR will be.
It’s especially important to compare APRs because the APR combines your interest rate, repayment term, and fees, which gives you a clearer picture of which loan is the best offer for your situation. The e as the interest rate, which is a single component of the APR.
Steps to get a personal loan with bad credit
If you’re approved, you may gain access to your funds as soon as the next day, depending on the lender.
Other options when you can’t get a personal loan
If a personal loan isn’t the right fit because of your credit score, you may have some other borrowing options. While you’ll want to avoid predatory lenders like payday lenders (because they charge such high fees and interest rates), these options may work for you under the right circumstances.
Friends or family: Borrowing money from a loved one can be difficult to navigate, but may be a more obtainable option if you have bad credit.
Get a cosigner: If you have your heart set on a personal loan, having a family member or friend with good credit cosign on the loan can increase your odds of qualifying.
Sign up for a 0% APR credit card: A credit card with an introductory 0% APR can give you free financing for a set period of time. Just make sure you have a plan to pay back what you owe before that introductory period ends and your interest rate shoots up.
How prequalifying might help you get a personal loan
Prequalifying for a personal loan can help you understand what interest rate you might get and how much you might be approved for. Another benefit of prequalifying is that if you’re not approved for a loan, you’ll learn more about what you need to do to qualify for a personal loan and where to target your efforts to become a stronger applicant.
If you want to improve your credit score before you start applying for personal loans, consider taking these actions to give your score a boost. It’s important to remember that it can take months or even years to improve your credit score, so patience is key, but these strategies are the fastest ways to make an impact.