Several types of lenders specialize in easy loan approval for bad credit borrowers. These loans may not require a credit check or may have loose qualification requirements. When used responsibly, the purpose of this type of funding is to provide borrowers with fast emergency cash when unexpected expenses or situations arise.
However, bad credit loans can come in a variety of forms, and they are not all created equally. Some loans have easy approval requirements but may also come with high interest rates or inconvenient repayment terms. Factors like these are why it is so important to research your options and compare offers when looking for the best personal loans.
What Factors Affect Loan Approval?
When determining loan approval, lenders will take a look at some basic information about each borrower. This information usually includes:
- Credit scores
- Financial history
Most lenders are going to inquire about your current credit score when you apply for a loan. Generally, lenders tend to favor borrowers with a higher credit score since they are usually considered less of a financial risk. Lenders or other creditors usually judge credit scores using the following tiers:
- 800-850: Excellent
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 300-579: Poor
The basic factors that make up your credit score are:
- Payment history
- Credit mix
- Length of credit history
- Recent credit inquiries
What Is The Minimum Credit Score Requirement for Personal Loans?
Some online lenders have minimum credit score requirements, but not all. For example, banks and certain credit unions may have more strict minimum credit score requirements than payday lenders or other quick cash loan options.
When reviewing your credit score, lenders will usually also look at your most recent credit report. Your credit report will contain information about your financial history, most important of which will be your payment history. Your payment history includes how timely you are with making due payments on your credit card debt, installment loans, and other financial obligations.
Lenders will also want to know your general income status to make sure you are able to pay back your personal loan funds. To confirm your income, some lenders may perform what is called Instant Bank Verification (IBV).
What is Instant Bank Verification (IBV)?
With IBV, lenders can view a consumer’s bank account history and confirm they have sufficient income or the financial means to cover their desired loan amount. IBV can also help the approval process for a loan go through faster, since lenders can see if an applicant has the ability to repay their loan right away.
Assets or Collateral
Depending on the type of loan you get, the equity in an asset or type of collateral may play a role in loan approval. A secured loan is funding where the lender bases approval as well as loan amounts, interest rates, and other loan details on the value of whatever asset or collateral the borrower offers. An unsecured loan, on the other hand, is funding where the lender will look at the borrower’s credit score, financial history, income, etc. to determine approval and loan details. Check out more differences between a secured and unsecured personal loan below:
Secured Loans vs. Unsecured Loans
|Criteria||Unsecured Loan||Secured Loan|
|Definition||Loans that are not backed by an asset or collateral.||Loans that are backed by an asset or collateral (e.g., a house, car).|
|Risk for Borrower||Lower: No risk of losing a specific asset if the loan is defaulted on.||Higher: Risk of losing the asset/collateral if the loan is defaulted on.|
|Risk for Lender||Higher: No asset to repossess if the borrower defaults.||Lower: The lender can seize and sell the collateral if the borrower defaults.|
|Interest Rate||May be higher due to increased risk for the lender.||Typically lower due to collateral backing the loan.|
|Loan Amount||Typically lower as they’re based on creditworthiness alone.||Can be higher as they’re based on the value of the collateral.|
|Fundingestoated Approval Speed||Can be faster since no valuation of collateral is required.||Might be slower, especially if it requires an appraisal or valuation of the collateral.|
|Credit Requirement||Generally requires a good to excellent credit score.||Can be more lenient as the loan is backed by collateral.|
|Usage Examples||Traditional personal loans, student loans, credit cards.||Mortgages, car loans, home equity loans.|
|Pros for Borrower||– No risk of losing a specific asset.- Faster approval times.||– Possibly lower interest rates.- Potential for larger loan amounts.|
|Cons for Borrower||– Higher interest rates.- Typically smaller loan amounts.||– Risk of losing the collateral. – Might involve an in-person inspection/appraisal of collateral or assets.|
What Are the Easiest Personal Loans to Get Approved For?
The easiest loans to get approved for would probably be payday loans, car title loans, pawn shop loans, and personal installment loans. These are all short-term cash solutions for bad credit borrowers. Many of these options are designed to help borrowers who need fast cash in times of need.
Personal Installment Loans
Unsecured personal loans for borrowers with less-than-perfect credit scores are some of the easiest loans to get approved for. You can usually get more money with a personal installment loan than you can with some of the other fast-cash options like payday loans. You may also have more time to repay your balance with a personal installment loan. Generally, borrowers have several months up to a couple of years in some cases to repay the loan and interest.
Payday loans are also unsecured loans, but they usually offer smaller amounts of money and less time to repay the loan plus interest. Usually, borrowers have to repay these loans within two weeks, or by their next payday. The higher interest rates combined with the short repayment period can make this type of loan difficult to repay on time. According to the Federal Trade Commission, the annual percentage rate of a payday loan can reach as high as 390%!1
Even if you need money fast, consider your options carefully before you take out a payday loan. They may offer instant approval and be easier to find than other types of loans, but they could end up damaging your credit reports and credit history in the long run.
No Credit Check Loans
Loans like payday loans usually fall under the category of no credit check loans. When loans have no credit check, the lender will usually skip the official hard credit check most lenders perform, and instead do a brief soft credit pull. The purpose of the soft credit pull is simply to confirm the borrower isn’t currently declaring bankruptcy or going through pre-bankruptcy counseling.
Cash advance loans are designed to provide consumers with early access to cash while waiting for their next payday. Consumers can access cash advances via online lenders, credit cards, or even certain mobile apps. Similar to payday loans, cash advances also usually come with low funding amounts, high interest rates, and brief repayment terms.
Credit Card Cash Advance
If you have a credit card account, you may have another type of cash advance available. With most credit cards, account holders can borrow against their available credit limit to take out cash. From there, the account holder would simply repay the balance like they would with any other credit card purchase. However, it’s important to note that interest rates on credit card cash advances are often much higher than the rates included with traditional credit card transactions.
Car Title Loans
Car title loans are a type of secured loan which means you’ll need collateral to get loan approval. They’re similar to an auto loan in that the collateral would be your vehicle. This means that if you can’t repay the loan by the due date, the lender can legally seize your vehicle and sell it. This makes these loans very risky if your vehicle is crucial to your everyday life. Consider other types of loans or credit cards in an emergency for an easy loan experience without the risk of losing your valuable belongings.
A 401(k) is a retirement savings plan offered by some places of employment. If your company offers a 401(k) plan, you can contribute funds regularly from your paycheck for your use when you retire. Many times, employers will match or contribute a certain percentage of an employee’s 401(k) payments. Furthermore, some 401(k) plans allow account holders to withdraw money early via a loan, in exchange for a fee.
Some 401(k) plans have a hardship distribution plan that allows consumers to borrow money from their retirement savings in emergency situations.
Hardship Loans From Your State or Federal Government
Similar to a hardship distribution plan in a 401(k), there are also hardship financial aid options available through many state or local governments, and even the federal government. Some common types of government funding include but are not limited to:
- Low Income Home Energy Assistance Program
- Lifeline program
- Supplemental Nutrition Assistance Program (SNAP)
- Child Care and Development Funds
- Unclaimed funds that are in your name
- Down payment or housing assistance
- Tax credits from health insurance
Pawn Shop Loans
A pawn shop loan falls under the category of secured loans. But the collateral, in this case, may be any valuable item you own that the lender will accept. It could be jewelry, electronics, musical equipment, or any other valuable item. The lender gives you cash based on the value of the item, then you get your item back when you return the loan plus interest. But if you can’t pay it back they can keep your item and possibly sell it. It’s important to return the entire payoff amount by the due date if you want to keep your valuable item.
Think very carefully, and do plenty of research before choosing any loan. Some of these may be easy loans to get, but not very simple to pay off. In fact, data from the Consumer Financial Protection Bureau shows that more than 72% of consumers who took out a pawn loan still owed money after six months.2 Make sure you’re capable of paying it back on time to avoid any negative effects on your credit score. If you are trying to get a personal loan with a thin file credit score you may have to deal with higher interest rates, shorter repayment terms, or lower funding amounts.
Tips for Finding the Best Personal Loans
It’s always a good idea to prep your finances a bit before jumping into any kind of financial endeavor, including applying for personal loans.
Check Your Credit Score First
Before you begin your loan search, check on your credit score. As discussed, lenders will typically pull a hard credit check and review your most recent credit report before they grant a borrower approval on their loan. Before you submit an application and commit to that hard credit check, perform a soft credit check on your own to see if you meet your desired lender’s minimum credit score requirement if they have one.
Decide How Much You Need to Borrow
Ask yourself why you are looking into taking out a loan and what you want to pay for with the approved funds. If you are looking to fund a large expense, you may want to look into loans that come with higher funding amounts and longer repayment terms. But, if you are simply looking to cover a few unexpected bills, you may be just fine with a loan of a few hundred dollars that you can repay in a month or so.
Calculate Your Current Debt
Next, you will want to review your finances and take a look at how much debt you currently owe. Look at your credit card bills, loan balances, and other recurring expenses. If you find you already have an exorbitant amount of debt, you may consider holding off on applying for another loan, or looking into debt consolidation loans to balance out your debt-to-income ratio.
Know The Lender’s Qualification Requirements
In addition to making sure you meet any minimum credit score requirements, check to see if your desired online lender has other qualification standards. Secured loans, like a home equity loan, will require the borrower to own their home and be prepared for an appraiser to visit their property to assess its value. Bad credit loans, on the other hand, may have looser standards and may lend money to borrowers who simply have a recurring income and a bank account.
Research Online Lenders and Compare Offers
It is important to research personal loan lenders not only to know if a loan company is legitimate, but to make sure you are finding the best deal available as well. For example, say you came across Rocket loans and saw that you could get quick loan approval. If you didn’t bother looking at any other lenders you may have found out that loans like rocket loans can come with higher interest rates, and you could have found a more affordable deal with another lender or credit union.
When researching your options, take a look at the websites of several online lenders and call a few to speak with a loan agent. See what kind of charges they include as well as what types of interest rates, loan amounts, and repayment terms they offer.
Common Loan Fees
- Origination fees: An origination fee is an underwriting charge many lenders include for writing up your loan agreement.
- Prepayment penalties: A prepayment penalty is a charge some lenders impose on borrowers who make their monthly payment before its designated due date.
- Late fees: A late fee is a penalty charge most lenders require when borrowers fail to make their loan payment or submit their payment after its due date.
- Ballon charges: A balloon charge is a lump sum payment due at the end of the loan term. Balloon changes usually come with funding like mortgages.
Set a Repayment Plan
Lastly, before you officially apply for a loan, create a financial plan. Having a plan in mind will help keep your finances organized and set you up for success to repay your loan. Ask yourself questions and consider topics such as:
- What type of loan payments can you afford to contribute each month?
- How long do you want to take to repay the loan?
- How much will the loan cost in total? (Be sure to consider interest rate charges, origination fees, etc.)
How Does Getting Easy Online Personal Loans Work?
- Fill out an online application to see if you pre-qualify.
- Receive an approval status from the lender.
- Review your loan contract (confirm interest rates, repayment terms, loan amount, origination fees, etc.)
- Sign your loan agreement and get your cash!
Alternatives To a Traditional Personal Loan
Instead of applying for online personal loans, you may also consider options such as:
- Asking a friend or close family member to borrow money
- Using a credit card (only consider this option if you can repay the balance quickly)
- Earning cash from an additional source of income, such as from a second job or from having a garage sale
- Reviewing your finances to see if you can improve habits and free up money in your budget
FAQs on Easy Loan Approval
The “easiest” bank to get a personal loan from can vary based on various factors like your location, credit score, income level, and the specific terms you’re looking for. Some banks or credit unions might offer more lenient qualifying requirements, while others might have better rates for those with an excellent credit score.
While there are various options, borrowers with a bad credit score might consider secured personal loans, payday loans, or loans with a guarantor. However, it’s essential to be wary of high-interest rates and unfavorable terms, especially with payday lenders.
Direct deposit loans are when lenders typically deposit the approved loan amount directly into the borrower’s bank account, often within a day or two, making them a choice for those seeking personal loan options.
Yes, many online lenders offer low minimum loan amounts to cater to borrowers who just need a small sum. However, having a bad credit history might mean higher interest rates or stricter terms.
Yes, there are specialized auto loans for those with a lower credit score. These loans might have higher interest rates or require a larger down payment compared to conventional auto loans.
An easy personal loan can be used to consolidate multiple debts, like credit cards, into a single loan payment. This can simplify your financial management and potentially offer a lower monthly payment.
Payday loans are short-term, high-interest loans meant to be paid back by your next paycheck. They are different from personal loans, which generally offer more extended repayment periods and potentially lower interest rates. However, payday lenders might be more lenient with bad credit history.
Yes, some borrowers use personal loans to cover business expenses, especially if they don’t qualify for a business loan. It’s crucial to ensure you can manage the loan payment to avoid jeopardizing both personal and business finances.
Applying to multiple lenders might increase your chances of approval, especially if you have a minimum credit history. However, each application can result in a hard inquiry on your credit report, potentially affecting your credit score.
Your estimated monthly payment can be determined by considering the loan amount, interest rate, and loan term. Many online calculators can help with this. Ensure you’re comfortable with the amount before borrowing.
While payday loans are often one of the quickest options, they come with very high-interest rates and potential fees. It’s important to explore other fast personal loan alternatives before resorting to a payday loan, even with a low credit score.
Remember, while the ease of getting a loan might be appealing, it’s crucial to understand the terms and the long-term impact on your financial health. Always read the fine print and consider consulting with a financial expert.
A Word From CreditNinja
Finding a convenient loan you can afford isn’t always easy, especially when dealing with bad credit or even past bankruptcy. If you have been struggling with poor credit and are having trouble finding affordable funding, consider a personal loan with the help of CreditNinja! CreditNinja is an online lender specializing in emergency loan funding for borrowers who may have a less than perfect credit score.
Besides competitive CreditNinja interest rates, borrowers may also enjoy the following perks when they get personal loans with CreditNinja:
- No minimum credit score requirement
- Flexible repayment schedules available
- Affordably monthly payments
- Expert customer service team
Looking for more information about online loans, handling your finances, improving your credit score, and more? Check out the CreditNinja blog dojo for hundreds of free resources available to everyone 24/7!