Want to apply for personal loans for credit score under 550? This score is below the average credit score of 714 and considered as poor. It also implies that you may have a history of multiple missed or late payments, foreclosed loans, or bankruptcies. This is why many lenders don’t consider you a reliable borrower, so they avoid giving you any loan.
And if some lenders decide to give you personal loans for credit score under 550, they charge a high interest rate on the amount. In this guide, we’ve covered everything you need to know from the top five lenders who offer personal loans for credit score under 550 to best tips for getting personal loans for bad credit instant approval.
Top 5 Lenders for personal loans for credit score under 550
Money Mutual: This is a great platform for borrowers with 550 credit score looking for emergency loans. It covers loans for unexpected payments, medical bills, groceries, car repairs, and special occasions like wedding or travelling. To qualify for personal loans for credit score under 550, you must be currently employed or receiving regular income of at least $800. Also, you must be 18 or above years, US resident with active checking account.
Bad Credit Loans: This is another platform that offer personal loans to lenders with bad credit score. Its network includes both state and Tribal lenders. If you’re unable to find a lender, the platform will forward your profile to other lenders who can accept your loan application. The company also offers debt relief, credit repair, and other credit-related products or services.
CashUSA: Like Bad Credit Loans, CashUSA also provides debt relief, credit repair, and other services. Its network of lenders offers varying APR ranging from 5.99% to 35.99%, and the loan duration ranges from 90 days to 72 months. If your loan request is approved, you’ll receive exact fees and interest rate before you accept the offer.
Personal Loans: This platform increases your chances of getting emergency loans for a 550 credit score by offering a huge network of lenders. If it can’t connect a lender with you, it will send your loan request to its third-party networks to find a suitable lender for you. You can also explore other credit-related products or services that you may find useful.
Cash Advance: Cash Advance is another secure platform for finding best personal loans for 550 credit score. If you are looking for a short-term loan, you can fill up their form and submit it. When the lender approves your loan request, the loan amount will be transferred directly to your bank account. Lenders may also offer auto-debit services, where they automatically withdraw the payment on the due date. This helps avoid late fees, charges, and penalties.
Impact of a 550 Credit Score on Loan Terms
A 550 credit score can reduce your chances of qualifying for a personal loan. If a lender approves your personal loans for credit score under 550, it can still affect the interest rate you get. In simple words, the lower your credit score, the higher your chance of receiving the high interest rate as advertised by the lender.
Founder of Tailored Financial Planning and a certified financial planner, Stacy Dervin suggests that borrowers can face the risk of paying high origination fees if their credit score is low. As a result, they end up paying more for their loan. For example, if you take a personal loan of $12,000 with a three-year term, here is how much your low credit score affects the amount you pay.
Credit Score | Average APR | Monthly Payment | Total Interest | Total Repayment Cost |
550 – 599 | 31.78% | 521 | $6,763 | $18,763 |
600 – 639 | 28.77% | 502 | $6,050 | $18,050 |
640 – 679 | 25.31% | 479 | $5,248 | $17,248 |
Here, you should note that some borrowers with fair credit scores may pay $1,400 less interest than the ones with poor credit scores.
Low credit score can also have some long-term effects on your financial life. If you’re paying high-interest rates, it’ll impact your savings or your chances of investing in equity and assets. This may delay your wealth building and even retirement for you.
Refinancing Options
Refinancing simply means applying for a new loan and then using the funds you receive to pay for the old loan. When the process is complete, you only make payments for your new loan with a new interest rate. This is one of the effective strategies to improve your loan conditions.
Overview of Current Personal Loan Rates
According to a survey by Bankrate, the average personal loan rate as of April is 12.18%. These rates may vary significantly based on the creditworthiness.
Borrowers with very good or excellent interest rates may receive the lowest interest rate as compared to individuals with low or poor credit scores. So, borrowers with low credit scores often use an asset as collateral to achieve a lower interest rate.
Credit Score | Average Rate (Low) | Average Rate (High) |
Excellent (720 – 850) | 10.7% | 12.5% |
Good (690 – 719) | 13.5% | 15.5% |
Average (630 – 689) | 17.8% | 19.9% |
Bad (300 – 629) | 28.5% | 32% |
How to Apply for a Personal Loan With a 550 Credit Score
If you want to apply for personal loans for a credit score under 550, follow these five steps:
- Credit Report Check: The market is flooded with banks and lenders who offer loan services based on minimum credit score. Hence, do credit history check first and then try to see what kind of lenders would be the best. Many sites can help you review your credit reports online for free.
- Credit Improvement Tips: Your good credit score enables you to access a personal loan at lower interest rates. Some of the methods of achieving this goal include consistently paying your bills by the due date, maintaining your old credit card accounts and keep them open, paying down your debt, and avoiding hard inquiries.
- Lender Comparison: Evaluate the lenders in terms of their credit requirements, APRs, repayment periods and the fees they may charge. Upon having evaluated all the personal loans, you are now able to pick the option you prefer the most.
- Exploring Secured Loans: Typically, personal loans are unsecured loans. However, some lenders offer secured personal loans. Such loan requires you to have a collateral, for instance, the money in your savings account or a deposit certificate, in order to be qualified for the loan. This collateral acts as a safeguard for the lenders as they can seize your asset to get their loaned amount back if you fail to repay the loan.
- Application Guidance: After shortlisting lenders, you can fill out the loan application and add the tax returns and pay stubs as important documents. Upon the approval of the loan, you will be issued a loan agreement. Check its terms before signing the agreement, which include APR, fees, repayment period and first installment date.
Some lenders offer the funds on the same day, while others may take the next day or a few business days after your loan has been approved.
Managing Your Loan Effectively
To manage the loan effectively, do not delay payment or default. This prevents you from being penalized with late fees and similar terms which often damage your credit history. You can also set aside your monthly loan amount to ensure that your account have sufficient funds for loan repayment.
Priority should be given to paying off personal loans ahead of the given term if your lender allows it. This is one of the best ways to manage your loan. This can be used to actually get back your financial independence quicker while also lowering the interest rate and improving your credit score. If you are having trouble with various personal loans, you can try combining them together. Through this way, you can obtain a lesser loan amount to cover all of them. What’s more, it is one of the best methods of decreasing the interest rates.
Tips to Secure a Personal Loan with a 550 Credit Score
To easily secure instant personal loans for credit score under 550, you can follow these steps:
- Check Credit Report: You can use free websites such as Annual Credit Report to check your online credit report. This will give you an overview of your best lenders to choose from.
- Compare Lenders: Make a list of lenders that fit your requirements. Compare them by the APRs, credit regulations, fees, and repayment terms.
- Pre-qualification: Narrow the list of your possible lenders and then prequalify with them to find out if you can apply for a personal loan or not. Not only it will give you the estimated APR but also the amount of the loan you get approved for. Pre-qualification will not affect your credit score. However, if you apply for personal loan, it may affect your credit score only up to 5 points for a whole year.
- Co-signer: In the event you don’t get the loan on account of a bad credit score, you can always ask for a co-signer with a better credit history. It can substantially increase the probability of you getting a personal loan.
- Secured Loans: Some lenders offer secured personal loans in which you give them a collateral. The lenders use collateral, which is usually an asset that the lenders can seize if the borrower defaults on the loan. Here, lenders set you a lower interest rate because they no longer have to bear the risk.
- Smaller Amounts: If you want your loan application to be approved, it is better to start with some small personal loans at first. Additionally, this will have a positive effect on your credit history.
- Demonstrate Stability: To increase your chances of obtaining personal loans for credit score under 550, you need to exhibit financial stability by ensuring that all your bills are paid on time. Here, you don’t need to pay a fee or a penalty nor does it harm your credit history.
- Debt-to-Income Ratio: The DTI ratio is calculated by dividing the sum of all your monthly debt by your gross month’s income. Furthermore, it assists the lenders to know how capable you are to pay if you have to take out a loan. Consumers with high Debt-to-income ratios are perceived as being the riskiest ones to make payments on a regular basis.
- Credit Builder Loans: These are the best personal loans for 550 credit score. They help borrowers by granting small loan amounts which they can pay regularly. The only catch here is you don’t get the full amount until you have made all the payments.
- Financial Counseling: Financial advisor grants you a chance to learn and implement effective credit management. They can develop a debt management plan (DMP) so you can manage your budget and pay your debts on time.
Conclusion
There are many lenders who provide personal loans for credit score under 550. But they may be unsuitable for some in terms of the limitations and higher rates. So, it’s important to make timely payments. This way, you can actually avoid any damage done to your credit score. If you are denied emergency loans for scores less than 550, then personal loans with co-signer or collateral can be good idea. It minimizes the risk of a lender and you end up with better interest rates. Still, it’s always better option to strengthen credit score by paying bills on time, credit utilization reduction, and bypassing the hard inquiries.
