In a perfect world, we’d never spend more than we have in our bank accounts at any given time.
Of course, the world we live in is far from perfect, and sometimes you need money you just don’t have quite yet in order to make ends meet.
When faced with this common conundrum, many consumers make the mistake of turning to their credit cards to bridge the gap and get the money they need in the interim. However, they come with sky-high interest rates and the low minimum payments. They may seem appealing on the surface, but can quickly put you into a debt spiral. Using credit cards in a financial emergency is just about the worst thing you can do.
This sticky scenario is only complicated if you already have a less-than-perfect credit history, which can lead to even higher interest rates or out-and-out disapproval when you submit an application. If you do get approved for a high-interest line of credit, it can be even more difficult to keep up with those payments, only causing your credit score to deteriorate even further.
Of course, that doesn’t mean you’re never going to face an emergency or need a last-minute cash injection to get out of a pinch. Fortunately, there’s a better answer than consumer credit cards or payday loans and it’s accessible even to those who don’t have a spotless credit history.
Top 4 Bad Credit Loans
Ready to find the personal loan that can help get you back on solid financial footing, regardless of what your credit history looks like? Here are our top picks for bad credit loans with monthly payments.
$500 - $5,000
3 to 60 months
The name says it all. BadCreditLoans.com is a trusted resource to turn to when you’re in a financial pinch, even if your credit report has a blemish or three.
Along with the ability to connect you to a reliable lender thanks to their sprawling, nationwide network, the site also offers a host of valuable user resources to help you identify scams, get savvier about your debt, and repay your loans as quickly and painlessly as possible.
Features and Benefits
- No obligation or fee to check loan approval
- High approval rate despite credit history
- Term Lengths: 3 - 36 months
- Assisting people with bad credit since 1998
$500 - $10,000
6 to 72 months
You might just need a quick $500 to tide you over until next payday, but you also might need a more substantial sum, like $10,000. Either way, CashUSA.com is a trusted name in the industry to turn to, renowned for finding workable solutions for any credit type.
Your application can be submitted in just minutes online, and once a decision is made, the funds can be transferred directly to your bank account. And with loans starting as low as 5.99%, you may find you’re saving a lot of money compared to what you would have been paying to those consumer credit card issuers.
Features and Benefits
- Flexible borrower requirements
- Loan request can be approved within minutes
- Money deposited as early as 1 business day
- All credit types accepted
Up to $2,500
Your sudden financial need doesn’t have to be in the tens of thousands of dollars to be intimidating and stressful. If a windfall of up to $2,500 would get you out of the pinch you’re in, MoneyMutual might be the answer you’re looking for.
The funds can be delivered within as little as one business day of the acceptance of your application.
MoneyMutual has been trusted by more than two million customers, but if you’re in New York, heads up: this service isn’t available to you! Choose from one of the other qualified lenders or loan aggregators on this list.
Features and Benefits
- Fill out online form in less than 5 minutes
- Get a decision on your loan within minutes
- Loan deposited in little as 24 hours
- Trusted by more than 2,000,000 borrowers
$500 - $35,000
3 to 72 months
Finding a personal loan for a major expense can be insanely frustrating for those of us with not-so-stellar credit. Just because your score doesn’t quite reach 800 doesn’t mean you don’t deserve a well-maintained home — or to pay off your medical bills.
So if you need as much as $35,000 as quickly as possible, PersonalLoans.com may just have you covered. The quick and easy online application takes minutes, and you’ll have a decision within a business day of submission.
Features and Benefits
- Multiple loan types available
- Fast loan decision
- Funds deposited as soon as you accept offer
- Nationwide availability
Why is an installment loan better than a credit card?
Rather than putting your unforeseen expenses onto a credit card, where you may face an interest rate of 17% or even more, it might be a better idea to look into taking out a personal loan, sometimes also known as an unsecured or installment loan.
They’re called “unsecured” because they don’t carry any collateral, like a mortgage or a car payment, and they’re paid off over the course of time in regular monthly “installments.”
When you take out an installment loan, the lender gives you a lump sum up front, usually at a fixed rate. It comes with an agreement that you’ll repay the principal and interest over a set period of time, usually between three months and five years. For those looking to fund an unexpected expense or financial emergency, this approach is better than using credit cards for two major reasons.
- Installment loans tend to have lower interest rates than credit cards, although your individual loan terms will vary and may be impacted by your creditworthiness. For context, though, personal loans tend to start around 5% APR, whereas credit card companies charge 17% on average.
- Installment loans are for one lump sum, rather than allowing you the capacity for open-ended spending. With credit cards, even if you just intend to use it for your financial emergency, it’s all too easy to turn back to it again and again for future expenses. This is exactly how people rack up huge amounts of revolving debt. With personal loans, you’ll know exactly how much you owe ahead of time, which means you’ll only ever be responsible for that much during repayment!
Using Personal Loans to Consolidate Debt
Many people take out loans to cover a discrete expense, such as long-needed home repairs or a hefty hospital bill. But if you’re already drowning in consumer debt, you can also use a loan to take a tactic known as debt consolidation, which can help save you lots of money in interest in the long run.
Here’s how it works. Say you have $10,000 remaining in student loans (5% APR), as well as two maxed-out credit cards. Credit card A has a balance of $3,000 and an APR of 22%, and credit card B’s balance of $7,000 is charged at an APR of 17%.
If you chipped away at all your debts paying only the monthly minimum, you’d end up spending thousands of dollars in interest. Not to mention having to keep track of three separate accounts, which all need to be paid to separate companies and may also have three disparate due dates.
If you take out an installment loan for $20,000 instead and pay off all three accounts at once, you’ll only have one account to worry about. Plus, you’ll know exactly how much you’ll be paying in interest ahead of time. (And given that installment loans carry lower interest rates than credit cards on average, you stand to save a significant chunk of change while you’re at it.)
How does a personal or installment loan work?
Applying for, receiving, and repaying personal loans is easy. All you need to do is submit your personal information, and the financial institution will let you know what level of funding is available to you. Depending on the lender, the application may or may not impact your credit score, and your credit history will usually play a factor in the terms and conditions of your agreement. (But don’t worry, that doesn’t mean you won’t be able to find a loan if you have imperfect credit!)
Once the bank has the information it needs to render a decision and you’ve agreed to the proposed terms, you’ll receive the funds, usually either by check or electronic transfer. You can then use them to pay off your bills, consolidate your debts, or for whatever your original purpose was. Then, you’ll begin repaying them on a monthly basis shortly thereafter.
When agreeing to the terms of the loan, however, it’s important to think critically about what kind of loan will work best in your situation. How your loan agreement is set up has a huge bearing on how much interest you’ll pay overall, even if your lender offers a seemingly-low interest rate.
Installment loans must typically be repaid in full within between three and five years after the funds are borrowed, though specifics vary. It can be tempting to agree to short-term loans, which dangle the promise of being debt-free in no time… but the shorter the term, the higher the necessary monthly payment tends to be.
That said, longer-term loans can also be expensive in their own right since you’ll be paying the interest for a longer time period. When the APR is fixed, spending more years repaying the loan means putting more money into the bank’s pockets, so it’s important to find the balance between affordable monthly payments and the shortest term that’ll work in your scenario.
Also, keep in mind that even at a significantly lower interest rate, it’s possible to take out high-total personal loans in the ballpark of $35,000. This can be a godsend if you have unexpected medical bills to cover, but can also be painstaking and expensive to repay.
As with all lines of credit, a failure to pay on time can lead to negative reports to the credit bureaus. So, make sure you can afford your loan before you sign the paperwork. (On the flip side, positive activity associated with your new loan can stand to boost your score, so take it as an opportunity to brush up your credit report for next time!)
Although a debt-free lifestyle is an ideal we all aim for, sometimes, taking out a little bit of debt is the key to creating a sounder financial future. This is true especially if your options are between a bad credit personal loan or a high-interest credit card.
Using these financial products responsibly can help you get out from under a bad situation while also creating positive activity on your credit report, which can mean smoother sailing further on down the line.