Everyone gets in financial problems at some point, make the best of a bad situation with these best bad credit loans options
We’ve all been there, you miss a payment or just don’t have the money in your account to cover a check. Your credit score gets destroyed and interest rates jump. That means higher interest and higher payments.
Once you fall into this bad credit trap, it’s almost impossible to get out. I’ve been there a couple of times before I was able to dig myself out of the bad credit trap.
Most banks aren’t going to help out. Banks are great for loans when you don’t really need them but aren’t interested in helping out bad credit borrowers.
So what do you do? What are your options?
If you need money, worrying about what you could have done differently won’t help. The best way to handle the situation is to find the best bad credit loans options and use them to get back on your feet.
We’ll talk first about different peer to peer lending options for bad credit, some with lower interest rates and even one where you won’t have to pay the money back. Finally, we’ll cover the best bad credit loans websites and which you can use to get back on your feet.
- Understand your loan options with bad credit
- Review peer to peer lending sites to find the lowest fees
- Apply to multiple sites and choose the lowest rate
- Pay off high-interest debt and consolidate loans
- Increase your credit score with regular payments on your p2p loan
Best Bad Credit Peer Lending Options
Before you jump online for a bad credit loan or other debt option, understand that there are different ways to raise money. Some will need to be paid back while others won’t. Some bad credit peer lending options can be in your bank within a couple of days while others might take a little longer.
Crowdfunding takes the longest of the bad credit p2p options but it’s money you don’t have to pay back. There’s two ways you can approach crowdfunding, through rewards-based or social crowdfunding.
Rewards-based means you’ll need an idea to fund and give away rewards to supporters. Social crowdfunding on sites like GoFundMe is money people donate based on your cause or need. Unfortunately, crowdfunding isn’t an option for most people that just need a little extra to pay the bills or get out of debt.
Next on the list is refinancing or some other type of mortgage loan. These may be difficult to get if you’ve got really bad credit but it will help if you’ve got some equity in your home. Since it’s secured debt, interest rates will be lower than on other types of loans.
Personal loans and peer to peer lending are the next best bad credit loan option. Most peer to peer lenders have higher credit score standards, up to 640 for SoFi, so it may be more difficult getting a loan on bad credit but the interest rate will be a little lower.
Other peer to peer lending sites like PersonalLoans.com offer loans to borrowers with scores as low as 580 FICO. I’ve used the personal loans website twice before when I destroyed my credit. I used the site first for a debt consolidation loan and later for a home improvement project.
Personal loan websites will usually approve borrowers with poor credit and there’s never an early payoff fee so you can manage the interest by paying it off early. This makes debt consolidation loans the most popular use of peer lending because you can pay off high-interest credit card loans and manage the interest rates.
The one bad credit financing option I wouldn’t suggest is a payday loan. These are probably the easiest option but it’s only because they cost the most financially. Payday lenders are quick to give you as much money as you want and as often as you want because they’re making upwards of 500% on their money.
If you need the money today, you might not be able to avoid a cash advance but try at all costs to use one of the other options. Most peer to peer lending sites can get you a loan within a few days and at much lower rates than payday lenders.
Best Bad Credit Loans Websites
So I’ve already noted SoFi for peer to peer lending. These loans can be a little cheaper than personal loans and credit but they are usually harder to get if you have bad credit, i.e. a credit score below 640 FICO. Now let’s look at some of the best bad credit loan websites below for personal loans and credit.
PersonalLoans.com is a bad credit p2p lending site but works on the lending network model. The loan website has a network of loan providers with different credit requirements so you get matched with your best bad credit loan option.
Upstart is a newer peer lending site and has special lending requirements for new graduates and others with no credit history. Rates start lower for peer loans on the site because the lender is a little more strict on loans to people with poor credit. The origination fee is also lower compared to other sites so you save money getting your loan as well.
SoFi is one of the few p2p lending sites that offers student loan refinancing and home mortgage loans. They don’t release the minimum credit score needed for a loan but it is higher than most websites. SoFi is running a $100 cash back bonus on new loans and interest rates are the lowest around.
NetCredit is another p2p site that specializes in bad credit loans but rates can be a little higher than some of the other websites. Loans tend to be shorter-term, even as short as six months. I’d recommend getting a longer term loan and just borrowing more so you don’t have to go back for a loan often.
The best way to use personal loans and peer lending is borrow what you need to pay off high interest debt and make sure you’re not in the same situation again. That’s the biggest problem with payday lenders and other short-term loans, that you can’t get enough money to get out of your financial problems for good.
USAA offers credit cards, mortgages, insurance and just about every other financial service. It used to be that you need to be a veteran or in the military but the company has opened up to everyone. It’s credit card rates are some of the lowest available. I’m not a big fan of credit cards because there’s no payoff date and it’s easy to just keep spending but they can pull you out of a jam if you need money quick.
It's not a loan website but I've developed five personal finance calculators that will help you see your money in a totally new way. From debt payoff to a credit card interest calculator that will shock you, use these calculators to make your money grow!
Peer to Peer Lending Bad Credit Sites
I’ve used three of the peer to peer lending sites to repair my credit and now for investing. Each has its own features and advantages. Some of the p2p loan sites are better for bad credit loans because they lend to lower credit scores while other sites will cut your interest rate if you qualify.
Use the table here to decide which peer lending site is best for your needs.
|Peer to Peer Lending Site||Loan Fees||Credit Score Needed||Loan Rates||Notes|
|5%||580||9.95% to 36.0%||Best p2p loan site for bad credit borrowers. Lower credit score and three options including peer loans, bank loans and personal loans.|
|No Fee||Not available but higher than most, around 680 FICO||5.99% to 16.49% (fixed rate)|
5.74% to 14.6% (variable rate)
|Special discounts for variable rate loans. Offering $100 cash back on peer loans.|
|1% to 6%||620||6.25% to 30.0%||Best peer loans for graduates and no credit history.|
|No Fees||520||Vary by State||No fees and lowest credit requirements for lenders|
|1% to 6%||640||6.95% to 35.89%||Low rates on p2p loans for good credit borrowers.|
The best part about peer lending sites is that it doesn’t hurt your credit score to see if you qualify for a loan. That means you can check your rate on a couple of sites and then choose the loan with the lowest interest rate.
The best way to avoid bad credit is to always be working to improve your credit score, even when you don’t need the money. Check out our resource post 21 Steps to Boost Your Credit Score on PeerFinance101 to dig yourself out of bad credit before you need a loan.
Sometimes you just can’t avoid it and bad credit loans may be your only option. When that happens, understanding your options for peer to peer loans can help you find the best loan and save money on interest.