Choosing the right personal loan can be challenging. There is no shortage of ads claiming to offer the best option. The task becomes even harder when your credit score is low or you have no credit history.
But thanks to companies like Payoff and OneMain Financial, you aren’t out of options. We’ve evaluated several companies based on their trustworthiness and the conditions they provide for their clients.
Annual Percentage Rate (APR)
To unearth the best personal loans for bad credit, we start by checking the APRs offered by lenders. APR is often confused with interest rate, but there are subtle differences between these two terms. The interest rate refers to the annual cost of your loan and is expressed as a percentage. The APR is designed to give you more information about what you’re actually paying for and includes the lender’s fees in addition to the interest rate. In short, the APR is the overall cost of your loan.
Perhaps unsurprisingly, APRs for bad credit personal loans are higher than those available to borrowers with good scores. Personal loans for people with bad credit are considered high-risk, so companies have to find a way to stay in business even when certain customers are unable to pay them back. Nevertheless, we’re determined to find companies that offer the best possible APRs. Every penny counts, especially when you’re in a financial bind.
Speed and Ease of Use
One of the perks of getting a personal loan for bad credit is that the whole process of acquiring a loan is usually very fast and simple. Most lenders now offer online loans, and unlike traditional banks, they don’t require extensive financial checks to deliver the money you need. More often than not, you’ll have the funds in your possession as soon as the loan is approved or within a few days.
Some companies offer both secured and unsecured loans. Secured loans require collateral – an asset such as your car or property that your lender seizes if you’re unable to pay back your loan. Unsecured loans don’t come with any kind of collateral.
An unsecured bad credit loan may seem more tempting at first glance, but keep in mind that it often involves higher interest rates. Of course, if you don’t own anything that you can put down as collateral or simply don’t feel comfortable doing so, with good money management, an unsecured loan is nothing to be afraid of.
Charging additional fees doesn’t necessarily exclude companies from our list, because some tend to compensate for these fees by providing lower rates. Instead of just looking for lenders that charge fewer fees, it’s more important to assess each company’s overall offer.
Some of the fees you might be charged when applying for personal loans with bad credit include administrative, late-payment, or pre-payment fees.
Our review process guarantees that the companies we select are reliable. It’s always a good indicator when a company has successfully been in business for a while, which is something you can easily check online. You should consider it a red flag if you’re unable to find concrete information about a loan company, since that’s usually the case with scam agencies.
We also look at Better Business Bureau (BBB) and LendingTree ratings, as well as customer reviews. Before you take out a loan for bad credit you should check out what other customers have to say about the loan company.
Term Lengths and Loan Amounts
Simply put, your loan term is the amount of time you have to pay off your loan. The trick with loan terms is to determine the best balance for yourself. The overall cost of your loan will usually go up as you increase your loan term. However, your monthly payments will shrink.
There are a few factors you have to take into account when deciding on the term lengths of loans for bad credit. The main factor is the loan amount. Personal loans are typically between $1,000 and $50,000. If you plan on getting a smaller sum, repaying the loan as fast as possible might be your best option. On the other hand, larger amounts can be difficult to deal with unless you choose a longer repayment period.
This content was originally published here.