If you need cash immediately, personal loans can provide you between $1,000 and $35,000 for any purpose: consolidating your debt, covering medical expenses, funding a large purchase or paying for a special occasion like a wedding. Paid off in fixed monthly installments, low-rate personal loans can also be easier to manage than snowballing credit card balances.
When it comes to getting approved, however, consumers with good credit have the most options. Often personal loans are unsecured, which means they’re not backed by something else of value — like your car or your house — that the bank could claim if you fail to pay back the loan. To limit risk, banks will often reject most applications and reserve offers for individuals with the best credit.
But some online providers offer rates to people with a less-than-stellar credit history.
1. Search Based On Your Credit Score
Loan applications take into account a range of factors: your other outstanding debt and property, credit score, your income, current employment and a few other items.
It can take hours of research and applications with different banks to figure out whether or not you meet the standards of traditional and online banks. Hard inquiries are often required before you can take out a new loan or a line of credit; the pull becomes part of your credit history, which means that any other financial institutions can see it when they check your credit report.
Too many hard pulls in a year can lower your credit score. When you know what loans you’re a good fit for ahead of time, you can save yourself time and preserve your credit.
Fiona is a search, comparison and recommendation platform that helps you find pre-approved offers that fit your financial circumstances. By sharing limited personal data with their secure platform, Fiona helps you search, compare and get matched with a personalized loan offer.
2. Find The Best APR
Annual percentage rate (APR) is the amount of interest you’ll owe on a loan as a percentage of the total. It factors in any service fees or additional costs, but doesn’t include compounding. Because the process of calculating rates can be complicated and varies between banks, the APR is an industry standard that helps consumers compare similar offers.
Most personal loans come with APRs somewhere between 5% and 35%, but may go higher if you need to borrow a high balance. Some banks that offer personal loans to borrowers with bad credit do so with high APRs— that might even be higher than credit cards.
Make sure you do the research beforehand to investigate what the APR of the account will look like and if it’s the best interest rate among all of your options. Even if your credit card APR is lower, you might be limited by your maximum and might need a larger sum to cover emergency expenses, like home damage from a storm or an unexpected medical procedure.
Fiona can sort personal loan offers by APR and other key data to help you choose the best available option.
3. Compare Term Of Loan And Monthly Payments
Personal loans are predictable, paid off in fixed monthly payments over a predetermined schedule. When you choose between different loan offers, look for terms that will work best with your income and your budget. With a shorter term of loan, you can pay off your debt faster with less interest, but the monthly payment will be higher. Longer term loans give you more flexibility with lower monthly payments, but as a result you’ll accrue more interest and ultimately owe more money.
On the Fiona platform, you can sort by term of loan, APR or monthly payments to identify the best overall offers based on your personal data. Instead of navigating the website of each financial institution individually, Fiona compiles all the information in one convenient location.
4. Make A Financial Plan For The Future
No credit score is set in stone. Credit bureaus are always adjusting their calculations as you add to your credit report. When you make regular payments and carry less debt, you can improve your credit score to eventually have greater access to better offers.
If you’re carrying several high-interest loans, debt consolidation can help you combine your existing loans into one total with a lower interest rate. Debt consolidation makes it easier to attack the principal, instead of just paying off the interest on the total each month and over time you can make real progress to whittling down your debt.
Because personal loans work at fixed monthly rates, they can be a helpful tool as you plan new strategies for your overall financial health. Instead of just fixing the current problem temporarily, they provide an opportunity for reflection on the spending habits that led to bad credit in the first place.