bad credit personal loans
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Having bad credit can sometimes feel like the odds are stacked against you — especially when you need a loan and are either flat-out denied or only approved with sky-high interest rates. But does having bad credit mean always paying a premium for new credit, or is there another way?

If you need a personal loan and you have bad credit, you may have other, more cost-effective options. Below is a list of a few things to consider when it comes to getting a personal loan with bad credit.

A Few Things to Know About Personal Loans With Bad Credit

1. Where You Can Get a Personal Loan

If you’re shopping for a personal loan with bad credit, one potentially easy way to get started is with local banks or credit unions. It can help to talk to any financial institutions you already have a relationship with, if it’s a positive one, because sometimes that can tip the odds of approval in your favor.

That said, it’s simple to do an online search for a personal loan as well. You might not be able to see if the personal loan you’re looking for is available to someone in your credit range, but if you apply for pre-approvals, then you can find out without taking a hit on your credit.

Need a personal loan? Dispute any credit report errors before you apply with Upturn’s FREE tool.

2. The Costs Involved With a Personal Loan

As you are probably already aware, the primary cost of a personal loan is the interest rate. Personal loans (for bad credit and otherwise) can come with fixed or variable interest rates, and the rate you get will depend in part on your credit. Typically, the lower your scores, the higher your rate.

That said, you might be able to improve your chances of approval (and improve the interest rate you’re offered) if you get help from a co-signer. You will have to decide for yourself who might be a good co-signer for your situation. Borrowers often find someone who the borrower has a trusting relationship with and who has better credit to be a good co-signer. Even if you do get a co-signer and a better interest rate, however, there are still more costs to be aware of.

Below are some of the fees you might notice with a personal loan:

  • Application or administration fee
  • Late payment fee
  • Origination fee
  • Payment processing fees
  • Prepayment penalty
  • Returned payment fees

These fees don’t come with all personal loans. It’s up to the lender what fees they want to charge. You can find out which fees might come with the loan you’re interested in by reviewing the terms listed on the lender’s website before you apply.

3. Things to Watch Out for With a Personal Loan for Bad Credit

Technically speaking, personal loans for good credit and personal loans for bad credit are the same product. A personal loan is a loan you can get for your choice of uses (such as paying off other debt) and that you have to pay back within a fixed amount of time.

The difference, therefore, doesn’t come into play on what the product is, but how the product might be offered. Personal loans for good credit might come with fewer fees and lower interest rates, whereas personal loans for bad credit might come with more fees and higher interest rates.

However, there are red flags to watch out for with personal loans for bad credit. It’s easy to think extra fees simply come with the territory, but they don’t have to. In fact, they may be a sign that you should steer clear of that loan. Here are a few to watch out for:

  • Advance-fee loans: Loans that advertise “guaranteed” approval and require that you pay a fee upfront to get the loan; find more signs of this scam here
  • Credit insurance: Insurance that covers the loan payments if something happens to you, and is a red flag if the lender pressures you into adding it to your loan or says it’s required; learn more about this here
  • Payday loans: Short-term loans that are paid back with funds from your next paycheck; these loans come with exceedingly high interest rates, with recent data showing interest rates of more than 600 percent in some states

Researching Before Obtaining a Personal Loan

The minute you sign the paperwork on a personal loan, you’re involved in a relationship that can help you reach your goals or end up costing you more money than you expected. To avoid the latter, it’s important to do your research before you sign.

That might mean applying for pre-approvals on several personal loans so you can compare your options side by side, and then paying attention to the interest rates, what fees will be included, and if there are any red flags involved. The more research you do ahead of time, the better your chances of taking on a personal loan you won’t regret.

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