There are several reasons you may find yourself needing a small loan. Quite often this happens due to an unexpected expense. Perhaps you have a broken water heater or an unexpected issue with your car.
Whatever the case may be, if you don’t have much in savings, you may be worried that you won’t be able to pay for it – especially if you have bad credit. Not to worry, though. Even if you have bad credit, you have several options.
Let’s review some of them.
MoneyMutual offers slightly smaller loans of up to $2,500. Beyond that, the way this site works is similar to others. Simply fill out with eligibility form and you will be connected with a potential list of lenders. They, too, use a lending network.
Of course, that is assuming you meet the basic requirements. Per their website, you must make at least $800 and have an active checking account.
Provided you meet these requirements, you could be approved for a loan in as little as 24 hours.
$500 - $10,000
3 to 72 months
As low as 5.99%
CashUSA is a highly-rated service that offers personal loans of $500 to $10,000. APR varies, with rates ranging from 5.99% to 35.99%. There are a number of factors that influence interest rates, such as loan duration and your credit score.
Loans terms with CashUSA last anywhere from 90 days to 72 months. What that means is you will repay your loan in monthly installments, unlike much more expensive payday loans.
CashUSA uses a network of lenders, meaning the only have basic eligibility requirements. These include having at least a $1,000 after-tax monthly income and a bank account. Beyond that, it will be up to individual lenders to determine your eligibility.
$500 - $35,000
3 to 72 months
PersonalLoans.com is another site that offers personal installment loans. What sets them apart from other loan networks is they have loans up to $35,000. Larger loans will likely be reserved for those with excellent credit, but it’s nice to have the option.
Loans with their network of lenders are similar to others, spanning 90 days to 72 months. The APR is also 5.99% to 35.99%.
They do not specify a dollar amount in terms of income, but say you must be a full-time employee, self-employed, or regularly receive Social security or Disability benefits. You must also have a bank account.
$100 - $999
7 to 12 months
A cash advance loan is a small, short-term loan. Sometimes referred to as payday loans, these loans should only be used as a last resort.
CashAdvance.com says this about cash advance loans:
Cash Advance® works to connect customers with short-term loan options, which help provide extra cash in times of need. Short-term loans are meant to be used only as a last resort option and paid back on or before a borrower’s next paycheck. Loan amounts are typically between $100 and $999.
The average APR on this type of loan is around 400%. While that is extremely high, these loans can charge such high rates because they work with small dollar amounts.
For example, you may be charged $15 for a $100 loan over two weeks. $15 isn’t much, but over a year, that works out to $390. In other words, 390% interest.
Also, keep in mind that this type of short-term loan is prohibited in several states. That means if you live in one such state, you won’t able to obtain one, even online.
Secured Loans vs. Unsecured Loans
Before looking at the particular types of loans, we should establish the difference between secured and unsecured loans.
The difference is simple: with a secured loan, you offer one of your assets as collateral in exchange for the loan. In many cases, this will be a car or a truck. If you are unable to repay the loan, the creditor has the open of repossessing the asset you put up and sell it to recoup some or all of the losses.
This can be a good way to get approved for a loan when you otherwise wouldn’t be. However, it can be a risky proposition, particularly if you aren’t confident in your ability to repay the loan.
Local Credit Union
Your local credit union is potentially the best option if you need a small loan. Credit unions often have some of the best rates and loan terms. They may have multiple loan types to suit your needs as well.
However, each credit union will vary widely not only in terms of rates but also in terms of which borrowers they will be willing to lend to. As usual, the rates the credit union offers you will be affected by your credit score. If your score is especially low, they may not be willing to lend to you at all.
Regardless, this is an option you should consider before other alternatives. Be sure to check the personal loan options your local credit union offers.
Title loans are the one secured loan you will find on this list. As its name implies, with a title loan, you provide the title to a vehicle or other asset in exchange for a loan.
While this may not sound ideal, a secured loan may increase your approval chances, especially if your credit rating is poor.
These loans have an average interest rate of 300%, which is quite high. Loan amounts vary widely, ranging from $100 to $5,5000.
Due to these high-interest rates and the risk of having your vehicle repossessed, you should explore other options on this list first, such as a loan from your credit union or installment loans.
Bad Credit Loans Online
If you have bad credit, you might think you will never be able to get a loan. But while having a low credit score may make things more difficult, it doesn’t mean you won’t be able to get a loan at all.
To give you an idea, here are the requirements that CashAdvance.com lists:
- Be at least 18 years of age.
- Be a U.S. citizen.
- Have a current job, with an after-tax income of $1,000 per month.
- Allow for your employment to be verified.
- Have a valid checking account.
- Have a valid home and work telephone number, as well as a valid email address.
As you probably noticed, there is no mentioned of credit score. Not only that but there is no mention of behavior that lowers your credit score – late payments, bankruptcy, and so on.
CashAdvance does say that meeting these requirements doesn’t guarantee approval, and this makes sense because they are not a lender.
And some lenders do require a certain credit score. Nevertheless, if you meet these basic requirements, there is a chance you could get approval.
Here are some other things you can do:
Have Regular Income
Creditors will like to see that you have a stable income history. This is especially important with payday loans but will be helpful with any type of loan.
Having a stable income history will help demonstrate your ability to repay the loan. Without income history, the lender may worry you won’t be able to repay it.
The type of employment is not necessarily important; as long as you have income coming in regularly, that will increase the lender’s confidence in you.
Improve Your Credit Score
Although you are presumably here because you have bad credit, the reality is that you can always improve your credit score. Even if it looks bad right now, there’s no credit score that can’t be fixed.
The best thing you can do for your credit score is to simply make payments. Making payments on your credit cards and other forms of credit reduces your credit utilization. The general rule is that you should keep your utilization under 30%. This means that if you total available credit is $10,000, you should have no more than $3,000 of outstanding credit.
In addition, you should try to avoid late payments. If need be, set calendar reminders – but having past due payments is one of the biggest drags on your credit score.
Installment Loans for Bad Credit
As its name implies, installment loans are paid in several installments. This is in contrast to payday loans, which typically must be paid in full on or before your next paycheck.
Because installments loans work on a payment plan, you can bower much larger amounts. On personal loan network, PersonalLoans.com, offers personal installment loans up to $35,000.
They also require you have to have a credit score of at least 580, which is a fairly low threshold. APR on these personal loans ranges from 5.99% to 35.99%.
What to Do If You Are Denied for a Small Loan
If you don’t have great credit, there is no guarantee you will be approved for a small loan. Even if the creditor is used to working with clients like you, they may have a variety of criteria that could disqualify you.
If you are denied, don’t take it personally. Instead, focus on what you can do in response. You likely still have options.
Shop Around For Small Loans
Every lender is different. That means that each lender will have their own unique criteria when determining whether to grant you a loan. So even if one lender says no, you may be able to get approval elsewhere.
Shopping online makes it especially easy to cover all the bases. Sites such as CashUSA and MoneyMutual allow you to quickly and easily see a list of a number of different lenders. You can then contact each one and see if they will approve you.
One final note on this: even you are approved, you can still continue shopping around, depending on the loan. If you aren’t satisfied with the interest rate, for example, there could be another lender who will have better terms.
How to Use Your Small Loan for Bad Credit
Remember that while small loans can protect you from the brink of financial disaster, you should also use them responsibly. Because your credit score is already not the best, you don’t want to put yourself in a position where most creditors will deny you.
You may always be able to find someone who will give you a cash advance, but remember that these small loans should only be used as a last resort. Sometimes referred to as predatory lending, these loans are designed to keep you in debt.
Instead, you should work with your credit union or work with an installment loan. Pay these loans back on-time and in full and can actually improve your credit. At the same time, you will be able to keep the lights on.
And that’s a win everyone can appreciate.