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Best Business Loans for Bad Credit in 2020 (with Easy Qualification) ✅

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All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on TheTokenist.io. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.

When the economy takes a dive, businesses take a dive with it. That’s why many companies, especially small family enterprises, take out business loans to stay afloat.

If your business needs extra funding, this is a great time as any to solve that issue with a loan. Interest rates are at an all-time low and some government programs even provide free money for small businesses – although these programs are inefficient and often riddled with scams.

But what happens if you couldn’t get that free federal money, and your bank doesn’t like your credit score? Is that the end? Of course not!

We’re way past the point where we need to rely on banks and the government for funding. Numerous online lenders provide cheap loans quicker than big banks – and more importantly, these alternative lenders do not require high credit scores.

As long as you’re in the 530+ area, you’ll find plenty of offers. In some instances, these lenders don’t even look at credit scores – your business’ performance and cash flow are all that matters. 

So, if you have bad credit and need a loan, you just need to find the right one. This is why we’ve made a list of the best online lenders for companies with low credit scores.

Ready? Let’s see what the top of the online lending industry has on the menu today.

Top Business Loans for Bad Credit


Our pick of the best business loans for low credit:

1. Kabbage
Best Overall
2. Funding Circle
Best for Long Repayment Terms
3. BlueVine
Best for Quick Funding
4. Fundbox
Best for Low Requirements
5. OnDeck
Big Loans with Low Requirements

Best Business Loans for Bad Credit

1. Kabbage – Best Overall

Kabbage Logo

Pros

  • No credit score requirement
  • Near-instant approval for loans under $150,000
  • No APR
  • Loans start at a mere $500

Cons

  • Pricing doesn’t incentivize stretched-out payment
  • At least 1 year of business is required to get approved
  • The longest repayment term is 18 months

If you need quick funding and your low credit has got you in a pickle, you will probably love Kabbage. As one of the biggest online lending platforms, Kabbage has given out more than $6.5 billion in loans ranging from as little as $500 to $250,000.

Even if you have a very low FICO, you still might find a good loan here. This is because Kabbage won’t measure your creditworthiness solely on your credit score. Rather, the company will look at your business’ performance – you will get the money if your company has good cash flow and performance.

Your business must have annual revenue of at least $50,000 and there is no collateral, but you have to guarantee the debt personally. There is no origination fee, which makes these loans more accessible and the payment terms can be anywhere between 6 and 18 months.

There’s no APR for Kabbage’s loans – instead, you need to pay a fee that equals 1.5% – 10% of the amount you owe every month you’re still in debt. This means you pay your principal every month plus the aforementioned fee. This means that the quicker you pay off the debt, the less you have to pay.

If you meet the requirements and your desired loan is under $150,000, it will likely get approved in minutes. However,  debt requests larger than $150,000 are vetted manually and usually take up to one week to go through.  


2. Funding Circle – Best for Long Repayment Terms

Funding Circle Logo Banner

Pros

  • No minimum revenue requirement
  • Longest loan term is 5 years
  • Low interest rates for clients who qualify

Cons

  • Relatively high minimum loan
  • 620 FICO requirement
  • Loan disbursement can take as much as 10 days

Some businesses need big loans and big loans often require long payment terms. Funding Circle provides just that – business loans here range from $25,000 to a whopping $500,000 and the repayment terms can be as long as 5 years.

The requirements here are a bit stricter, though – you need a 620+ credit score and at least 2 years in business to get a loan from Funding Circle. Also, all owners need to sign a lien on company assets and give a personal guarantee that their company will respect the terms of the loan.

There is no minimum company revenue requirement and the lowest APR is very competitive at 4.99%. You will need a higher FICO than 620 to get the lowest APR but whatever loan you get, you will need to wait up to 10 days until your application is approved and the money transferred to your bank account. 

This waiting time is slightly longer than average but it is not the only drawback – clients need to pay a 3.49% – 6.99% origination fee which you can avoid completely with some other lenders. This means you need to pay a percentage of your loan upfront just to get your funds.

All in all, Funding Circle can get you where you need to be if you’re looking for a bit more substantial business loan. The 620 FICO requirement isn’t the lowest but you can have as much as 5 years to pay your loan off and the interest rates at Funding Circle are among the lowest you’ll come across today.


3. BlueVine – Best for Quick Funding

BlueVine Logo

Pros

  • Funding in less than 24 hours
  • Credit requirement is only 530
  • Business only needs to be 3 months old

Cons

  • APRs are not the lowest
  • Inflexible payment terms (6 – 12 months)

Those in need of quick funding need a quick lender – and therein lies BlueVine’s bread and butter. The approvals here usually take up to five minutes, and if everything checks out, you will get money for your company in 24 hours or less. 

BlueVine won’t test your patience and getting approved is pretty easy to boot. The minimum required credit score is 530, but your business needs to be at least 3 months old and have $120,000 or more in annual revenue to qualify. This makes BlueVine better suited for companies that have an established revenue stream rather than brand-new enterprises.

Loans at BlueVine range from $5,000 to $250,000 and APRs can be anywhere between 15% and 78%. Since payment terms are always between 6 and 12 months, paying off BlueVine’s loans is a bit more difficult compared to other loans on this list.

However, the expenses are clean – there are no origination and prepayment fees, so you can get rid of your debt earlier with zero penalties. BlueVine also offers invoice factoring ranging from $5 thousand to $5 million with 1 to 12-week payment terms. 

In summary, BlueVine is super-quick and doesn’t require that much in terms of credit, company age, and revenue – but has an APR that’s a bit higher than other low-credit loans. This is why BlueVine is great for businesses with a healthy cash flow that need funding ASAP.


4. Fundbox – Best for Low Requirements

Fundbox logo Banner

Pros

  • Low minimum credit score of 500
  • Very low requirements all-around
  • Minimum loan is only $1,000
  • Funding only takes a couple of days

Cons

  • Repayment terms up to 24 weeks
  • Maximum loan is only $100,000

You don’t need a huge credit score and company revenue to get a business loan, especially when it comes to Fundbox. Your business must be at least 2 months old and have $50,000 or more in revenue – very accessible compared to most other business loans.

Moreover, Fundbox doesn’t require much in terms of patience. Applications get approved in minutes, and you can usually expect funding within the next couple of days.

The loans at Fundbox range from $1,000 to $100,000, which is limited but great for borrowers who don’t need a huge money injection for their business. The repayment terms are only 12 to 24 weeks but since the maximum loan isn’t huge, making the payments on time is doable.

The APRs for term loans can be between 10% and 78%, based on how healthy your company’s financials look to Fundbox. These rates are not fantastic compared to the top personal loans for bad credit – but considering Fundbox’s low requirements and speed, the 10% APR is a great offer.

If you need speed, competitive interest rates, and easy access then Fundbox might be a perfect catch. On the other hand, you might want to look elsewhere if you want a business loan with long, stretched-out payments.


5. OnDeck – Big Loans with Low Requirements

OnDeck Logo Banner

Pros

  • Low credit score requirement
  • Quick lending
  • Highest loan is $500,000

Cons

  • Origination fee
  • Average interest rates

Your business doesn’t need a huge credit score to get a sizable loan. OnDeck only requires a 600 FICO so you can approach them for a loan as long as your business has been in operation for at least a year and has annual revenue of $100,000 or more.

OnDeck’s term loans range from $5,000 to $500,000 so you’re covered regardless of whether you need a little or a lot. Repayment terms can be anywhere from 3 months to 3 years – which is very handy if you intend to get rid of your debt quickly.

There is no prepayment fee for term loans but you need to start your relationship with OnDeck with a 2.5% to 4% origination fee. On the other hand, opening a line of credit doesn’t incur fees and you can borrow up to $100,000 from your account.

OnDeck approves loan requests within 24 hours and disburses funds in as little as 2 working days. This makes OnDeck very quick, but not quite as cheap as other similar lenders. The APRs range from 11.89% to 51%, which would be fantastic if the competition wasn’t even cheaper.

All in all, OnDeck doesn’t particularly stand out in any specific field but has a strong all-around offer and low credit score requirements. OnDeck has had a solid run as an online small business lender, as it has already satisfied over 100,000 clients with more than $10 billion given out in loans.


What Bad Credit Means

Bad credit means a low credit score. When it comes to business loans, anything in the low 600s and below is considered lower than average, e.g. “bad”. Companies with bad credit will have a harder time getting good, low-interest loans, and sometimes, getting a loan at all.

Bad Credit Score

Having bad credit is especially problematic if you want to borrow from a bank. Traditional banks heavily favor high credit scores and will not consider a low-credit company worthy of loans even if the company’s business performance is excellent. That is why companies and individuals with low credit scores are better off looking for alternative sources of funding.

💻 Want to raise your credit score? You can do so automatically. The top credit repair software can increase your credit with just a few clicks.

How Alternative Lending Works

Banks usually won’t even look at your business if your credit isn’t as high as they think it should be – but there are other lending options and they often come with benefits. The lenders we will mention here are all available online, so you don’t have to go anywhere or wait in a line to speak to a counselor.

Online lenders like the ones in the list above have certain advantages over traditional banks. For one, they are 100% accessible online and can review your loan applications in a matter of days, and sometimes, in a matter of minutes.

Also, due to their fully-digital approach, online lenders can process your information quickly and transfer your funds just a few days after your loan has been approved.

Online lenders are quicker than banks but that’s not their biggest advantage. Some modern lenders don’t rely on credit scores to determine who gets a loan.

Rather, they will inspect your company’s performance and financial history. This means that you can get a good loan as long as your business is in good health – which is how things ought to be.

If you don’t know where to find these online lenders and which one will get you the best deal, you can try a loan aggregator. A loan aggregator is an online marketplace where you can see all loan offers available to you and pick your favorite one. 

These platforms are handy as they will shorten and narrow-down your search for loans dramatically. If you’re looking for a small business loan and have a FICO of 550 or higher, you can take a look at the pros and cons of Fundera – a lending platform that specializes in providing great business loans.

How to Get a Business Loan With Bad Credit

Sure enough, getting a loan is a lot easier with a perfect FICO – but what should you do if your credit is on the low side? Actually, there are quite a few options to choose from if you have got bad credit. Here are a few things you know when looking for loans with low requirements.

1. Check Your Credit Profile

First of all, you need to know what you’re dealing with. You should take a look at your business’ credit report as well as your own. Knowing how to interpret your credit report is something you’ll need to get started.

This will tell you your credit score as well as what you can do to improve it. The 3 big credit bureaus Experian, TransUnion, and Equifax offer free annual credit reports on their websites and checking them out shouldn’t take much time.

2. Limit Your Search

To save yourself a lot of time, it’s good to only look at lenders that are likely to give you a loan. Banks usually don’t look at clients with credit scores below 680 when it comes to business loans, so it’s better to check out online lenders if you’re in the 530 – 680 area.

You can find merchant cash advances for scores above 500 online, but business loans and lines of credit have stricter requirements.

3. Microlenders Deserve Attention Too

Some non-profit lenders only deal in small loans. These loans have very low interest rates if any at all so they are an excellent choice if your business can make use of a small, cheap loan.

4. Cash Flow is the Priority

If you don’t pay your credit bills on time, the missed payments get recorded in your credit report and drive down your score for the years to come. So, before accepting a loan, see if your cash flow is solid enough to make good on your debt every month.

5. Improve Your Credit

If you just can’t find the perfect loan, improving your credit might be the only way forward. To do this you can pay off your debt very responsibly and on time, improving your score over time. But before you take on that long journey, you should remove negative items from your credit report – under the right circumstances, this can improve your credit more than any single action.

6. Check Out Government Loans

The COVID-19 crisis has been bad for our health, but also the wellbeing of our economy. That’s why Uncle Sam has stepped in to help businesses stay with their heads above the water in this unwelcoming environment. The government is offering free small business loans, like PPPs and other types of loans.

How to Get a Business Loan During COVID-19

The government has set up a huge pot of money that it is using to help small businesses and their employees get through these unstable times. PPP loans and EIDL loans have been very popular among business owners lately because they are either cheap or completely free.

That’s right, PPPs are completely free money – as long as you don’t cut your employee count and avoid lowering paychecks by more than 25%. 

Although PPPs are meant for small businesses, big companies were the first in line for the free federal money. Moreover, the big banks and the government haven’t done a perfect job giving out these loans – thousands of companies haven’t gotten PPPs they got approved for. 

This is mostly because traditional banks simply cannot process and approve so many loan requests. If you want to get your hands on a PPP loan quickly, your best bet is to work with a top online loan aggregator. Banks have already done damage to small businesses by delaying loan payments, so an online lending platform is a better choice.

Are PPP Loans Still Available? 

No. PPPs were terminated on August 8th and there have not been any efforts to revive the program yet.

However, there are a few alternative programs small businesses can turn to. These include Federal Disaster Loans, 7(a) SBA Loans, Main Street Lending Program, and Employee Retention Tax Credit.

Types of Small Business Loans for Bad Credit

Banks can be very strict when it comes to giving out business loans. Fortunately, there are many loan types you can get through alternate lenders, even if your FICO isn’t very high. Here are some of them:

  • Term Loans. This is your usual loan – you borrow X amount of money and pay it back with interest over time. These loans can be used to fund your company or eliminate its debt through the process of debt consolidation.
  • Business Credit Cards. A credit card like this is good for two reasons – you can borrow money whenever you need to, and paying your bills on time is great for building your credit score quickly. Business credit cards work the same way as regular credit cards but usually have higher interest rates. That’s why you should only use them for borrowing small amounts you can pay off quickly.
  • Short-Term Loans. These are similar to regular term loans, but they have to be paid back in full in 3 to 24 months. Instead of making monthly payments yourself, your bank will automatically withdraw a fixed amount from your balance every week or month.
  • Short-Term Lines of Credit. You can think of a short-term line of credit as a credit card you intend to use for buying inventory and paying your workers. 
  • Invoice Factoring. You can have a bank (or some other lender) pay your employees’ paychecks so that you can pay back the bank at a later date. Your lender will then take a percentage of your company’s income every month to settle the debt.
  • Equipment Financing Loans. You can take out a loan to buy equipment for your business and use this equipment as collateral for the loan – this collateral keeps the interest relatively low. Equipment dealers offer equipment financing loans but you can also try other online lending platforms.
  • Merchant Cash Advances. You can take out a short-term loan that you will repay by giving your lenders a percentage of your future sales until the debt has been paid in full. Bad credit isn’t a big deal with this type of loan – as long as your company’s performance is good, lenders will see this as a good opportunity and will likely give you a merchant cash advance.

🛠 Did you know: There are a number of credit repair companies you can leverage to repair your credit score. Sky Blue Credit Repair is one of them — and they come with a 90-day money back guarantee.

Small Business Loan Fees and Expenses

Repaying a business loan isn’t as simple as making monthly payments on your principal and interest. There are many other expenses that can unexpectedly creep up on you if you didn’t read the fine print in the contract you signed.

Here are all the terms you need to know to make sense of the pricing of business loans.

  • APR – The annual percentage rate is the interest rate plus all other expenses associated with it. Usually, having great credit means you will get loans with lower APRs.
  • Down payment – Some lenders may require you to deposit up to 25% of the loan amount as a down payment. The better your credit score, the less you’ll need to pay upfront since lenders use credit ratings to determine if you’re a risky client. The downpayment can also be in equity – e.g. your business’ property.
  • Factor rates – Merchant cash advances use factor rates, and not interest rates, to determine how much the borrower needs to pay the lender. For example, if a company takes out a merchant cash advance for $1,000 with a factor rate of 1.3, it will need to pay back its lender $1,300.
  • Origination fee – Some loans incur a processing fee you need to pay upfront – this is called the origination fee. The fee counts towards paying off your total debt, but you need to pay it before you even get funds from your loan.
  • Underwriting fee – Before a lender gives out a loan, they have to pay the underwriters to assess the risk of doing so. Underwriting fees cover this expense.
  • Closing fees – Closing a loan isn’t very straightforward from the bureaucratic perspective. Cutting the red tape will only incur a small fee but it’s worth mentioning either way.
  • Late payment/prepayment fees – Logically enough, if you are late with a payment, that will incur a late payment fee. However, paying before the due date can incur a fee too. These are not the very common, but beware of prepayment fees when you take out a loan.

Bad Credit Business Loan FAQs

What Credit Score Do You Need for a Business Loan?

Most banks and alternative lenders require a credit score of 600 for small business loans. However, there are many online lenders and loan aggregators that only require 550 or even less. In some cases, an online lender might not require a credit score at all – they just look at your company’s performance and give you the loan if your business has good, stable cash flow. 

Can I Get a Loan With a Credit Score of 500?

Banks don’t usually give out business loans to borrowers with credit around 500. Some online lenders offer loans for credit around 500 but the interest rates are always high in that credit score range.

Do Banks Give Loans to Startups?

Yes, but only if the startups can repay them. Banks don’t like risks, so they will ask for collateral of the same value as the loan. The collateral is usually the property of the startup or a personal guarantee from its owners.

What is a 504 Loan Program?

A, SBA 504 loan is a lending program that involves 3 parties – the borrower, who puts in 10% of the loan, as well as a bank and a CDC (Certified Development Company) that finance the remaining 90%. This loan can only be used for buying fixed assets like real estate and the maximum loan amount is $5 million.

What Do Banks Look for When Giving Business Loans?

They look for the 5 “Cs” of credit – character, collateral, capacity, conditions, and character. These will determine if you will get a good deal and if you will get a loan at all.

What Are the Five “Cs” of Credit?

  • Character – First, the bank will look at your credit score and credit history. The higher your score and the longer your history, the better.
  • Capacity – The banks compare your income to your existing debt. They will look at your info to see if you are able to take on a new loan.
  • Collateral – If you have assets that the bank can seize if you default on your loan, it will result in better loan terms.
  • Capital – Same thing – if you have enough cash saved up, the bank will give you a better deal.
  • Conditions – Finally, the bank will ask you what you intend to use the funds for, and your answer will sway their decision. If you want to use the funds for something that will likely be profitable, the bank will like it more.

How Can I Secure a Business Loan Without Collateral?

Most business loans don’t require collateral – just the borrower’s personal guarantee that the debt will be paid off in time. However, putting the company’s assets and cash up as collateral will likely result in better loan terms.

All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on TheTokenist.io. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.

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Bad Credit

What is a Credit Builder Loan and Where Do I Get One?

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Your credit score plays an important role in your financial life. If you have good credit you can qualify for loans and borrow money at lower interest rates. If you don’t have a credit score or have poor credit, it can be hard to get loans and you’ll be forced to pay higher rates when you do qualify.

Building credit can be like a chicken and egg problem. If you have no credit or bad credit, you’ll have trouble getting a loan. At the same time, you need to get a loan so you have an opportunity to build credit.

 

What Is a Credit Builder Loan?

A credit builder loan is a special type of loan designed to help people who have poor or no credit improve their credit score.

In many ways, credit builder loans are less like loans and more like forced savings plans. When you get a credit builder loan, the lender places the money in a bank account that you can’t access. You then start receiving a monthly bill for the loan. As you make those payments, the lender reports that information to the credit bureaus, helping you build up a payment history. This improves your credit score.

Once you finish the payment plan, the lender will release the bank account to you and stop sending bills.

In the end, you’ll wind up with slightly less money than you paid overall, due to fees and interest charges. For example, let’s say you get a credit builder loan for $1,000, the lender may make you make a monthly payment of $90 each month for a year. After the year ends, you’ll get the $1,000 from the lender, but may pay $1,080 overall.

Why Get a Credit Builder Loan?

The main reason to get a credit builder loan is right in the name: They help you build your credit. If you don’t have any credit history or if you’ve damaged your credit by missing payments, it’s much easier to qualify for a credit builder loan than a traditional loan from a lender.

The companies offering credit builder loans take on almost no risk because they don’t give you the money until you’ve finished paying the loan, so they’re willing to approve people who have severely damaged credit.

Credit builder loans will help you build your credit history if you make your monthly payments, but you do have to pay fees and interest to do so. There are other ways to build credit that don’t require paying any money. For example, if you get a fee-free credit card and pay your balance in full each month, you’ll build credit without paying any interest or fees.

This makes credit builder loans best for people who have tried and failed to qualify for other loans and credit cards.

There is also some value in the forced savings provided by credit builder loans, but the interest and fees eat away at that savings. If saving is your goal, it’s best to use a different strategy to help you save, but if you want to save and build credit at the same time, a credit builder loan might be worth using.

Where to Find Credit Builder Loans?

There are many companies that offer credit builder loans. Each lender offers different loan terms, fees, and interest rates.

One of the top credit builder loan providers is Self. The company offers credit builder loans with payment plans as low as $25 per month, making it easy for almost anyone to afford a credit builder loan.

With Self, you can also qualify for a Visa credit card after you’ve made at least 3 payments on your credit builder loan and made $100 of progress toward paying off the loan. You can set your own credit limit, up toward the total amount of progress you’ve made on the loan.

The card doesn’t have any additional upfront costs and can help you gain experience with using a credit card. It can also help you build your credit by giving you another account to make payments on, providing you with more opportunities to build a good payment history.

Visit Self or read the full Self Review

What to Look for?

When you’re looking for credit builder loans, there are a few factors to consider.

The first thing to think about is the monthly payment. The point of a credit builder loan is to show the credit bureaus that you can make regular payments on your debts, which will help build your credit score. If a lender’s minimum payment is more than you can afford each month, you won’t be able to build your credit with that lender’s credit builder loan.

It’s also important to think about the cost of the loan. Credit builder loans often come with stiff fees and you also have to pay interest on the money you’ve borrowed, even if you don’t get access to it until you pay the loan off.

The fewer fees and the less interest you have to pay, the better. You should look very carefully at each lender’s fee structure to choose the best deal.

Finally, take some time to see how easy it is to qualify. While credit builder loans are targeted at people with bad credit, some lenders will still check your credit history and might deny your application.

If you have very bad credit, you might want to look for a lender that advertises credit builder loans with no credit check.

Alternatives to a Credit Builder Loan

Credit builder loans can be a good way to build credit for some people, but they come with interest charges and fees. There are other ways you can build credit worth considering. Some of them won’t cost any money, which may make them a better choice than a credit builder loan.

Secured Credit Cards

A secured credit card is a special type of credit card that is much easier to qualify for than a typical card.

With a secured card, you have to provide a security deposit when you open the account. The credit limit of your card will usually be equal to the deposit you provide. For example, if you want a $200 credit limit, you’ll have to give the card issuer $200 as collateral.

Because you give the lender cash to secure the card, it’s much easier to qualify for a secured credit card. The lender assumes almost no risk. Once you get the card, it works like any other credit card. You can use it to spend up to your credit limit and you’ll get a bill each month. If you pay the bill on time, you can build credit.

Many secured cards charge high interest rates and have hefty fees, but there are some fee-free options available. One great secured card is the Discover it Secured Credit Card, which has no annual fee and offers cash back rewards.

Become an Authorized User

Most credit card issuers let cardholders add other people as authorized users on their accounts. Authorized users get their own cards and can use them to spend money just like the main cardholder.

Some issuers will report account information to the credit reports of both the main cardholder and any authorized users. If you know someone that is willing to make you an authorized user on their credit card account, this may help you build your credit so you can qualify for a card of your own.

Not every issuer will report information to authorized users’ credit reports. It’s also worth keeping in mind that if you become an authorized user on a card and the cardholder stops making payments or racks up a huge balance, that will show up on your report as well, damaging your credit further. That can make this strategy risky.

Personal Loans with a Cosigner

Personal loans are highly flexible loans that you can use for almost any reason. If you need to borrow money, you can try to find someone who is willing to cosign on the loan. Having a cosigner can make it easier to qualify, even if you have poor credit, giving you a chance to build your credit score.

When someone cosigns on a loan, they’re promising to take responsibility for your debt if you stop making payments. Lenders will look at both your credit and your cosigner’s credit when you apply, so having a cosigner with strong credit can help you get the loan or reduce the interest rate of the loan.

Keep in mind that your cosigner is putting themselves at risk by cosigning on a loan. It’s even more important that you make your payments every month. If you don’t, your cosigner will have to pick up the slack.

Personal Loans without a Cosigner

Even if you have poor credit, you may be able to qualify for a personal loan designed for people that don’t have strong credit. Just keep in mind that you’ll have to pay higher fees and interest rates to compensate for your poor credit score.

If you’re looking for a personal loan and have poor credit, shopping around for the best deal becomes even more important. You can use a loan comparison site, like Fiona, to get quotes from multiple lenders so you can find the cheapest loan.

Related: Best Emergency Loans for Bad Credit

What Is the Difference Between a Credit-Builder Loan and a Personal Loan?

A personal loan is a type of loan that you can get for almost any reason, such as consolidating debts, starting a home improvement project, paying an unexpected bill, or even going on vacation. They’re offered by many lenders and banks.

A credit builder loan is less a loan and more a forced saving plan. When you get a credit builder loan, the lender doesn’t actually give you any money. Instead, it places the amount you’re borrowing in an account you can’t access. Once you finish paying the loan, the lender releases the money in that account to you.

Credit builder loans tend to be much easier to qualify for than personal loans because the lender doesn’t have to take on much risk. They’re mostly used by people who want to build or rebuild their credit score.

On the other hand, personal loans are less popular for building credit and more useful for providing funding when borrowers need cash to cover an expense.

Related: Best Prepaid Credit Cards That Build Credit

Pros and Cons of a Credit Builder Loan

Before applying for a credit builder loan, consider these pros and cons.

Pros

  • Easy to qualify for
  • Helps you build savings
  • Payments are usually small
  • Helps you build payment history

Cons

  • Not really a loan
  • Fees and interest rates can be high
  • There are cheaper alternatives to build credit

FAQs

These are some of the most frequently asked questions about credit builder loans.

Like most loans, it is possible to repay a credit builder loan ahead of schedule, but there are a few downsides to consider. One is that many lenders add an early repayment fee to their loans, so you’ll have to pay that fee if you want to get out of the credit builder loan. The other is that repaying the loan early somewhat defeats the purpose. Each monthly payment you make toward the loan helps you build your credit. If you pay the loan off early, you’ll make fewer monthly payments, which means less improvement in your credit.

Missing a payment on a credit builder loan is like missing a payment on any loan. You’ll likely owe a late fee and it will damage your credit. This is one of the reasons it’s important to make sure you can afford the monthly payment before signing up for a credit builder loan. If you can’t make your payments, the loan will wind up damaging your credit instead of helping it.

Final Thoughts

Credit builder loans can be a good way to build or rebuild your credit, but they’re not your only option. They often involve paying fees and interest, so you should search around for the best deal or look for cheaper (or free) alternatives, such as secured credit cards.



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How to lower your credit card interest rate and save money

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Why pay high interest on your credit cards when you can simply bargain a lower rate? These tips can help you save big money on your bill.

CHARLOTTE, N.C. — A lot of people have struggled to pay their bills during the COVID-19 pandemic and many have turned to credit cards so they can kick the can down the road. Now the time has come to pay it down and some of the bills are eye-popping. 

Did you know you can bargain that interest rate down and save quite a bit of money?

You could ask for a lower rate, but according to a new study, you can bargain down 10 percentage points. So, if your interest rate is 24%, it could mean paying 14% instead. That’s still high but it’s a lot better than 24% interest. 

These numbers are staggering and can be a bit overwhelming. Americans have an average credit card balance of $5,300, totaling $807 billion across 506 million credit card accounts. Why are these numbers important? Because they want to keep you spending, which means you have leverage to bargain.

“It is absolutely possible to negotiate your rate down. In fact, your chances of doing so are better than you think they are. Close to 80% surveyed said they did just that,” Matt Schultz, an industry expert with LendingTree, said. “You can save serious money, especially if your balance is bigger.”

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You have to try, and you have to keep trying, even if the lender says no. Take it higher to a manager and keep pushing. Drops of 10% are possible and that could save you hundreds, or maybe even thousands, of dollars. 

RELATED: VERIFY: Can your stimulus check be seized by banks or private debt collectors?

“So, a lot of people have bad credit, some are thankful to have it at all. Is it possible for them too? Yes, absolutely it’s possible,” Schultz said. “Credit card companies are willing to talk with you because they want to keep your business. It benefits them to lower your rate to keep their card in your wallet.”

Paying down debt is liberating. Less debt is more buying power but you must advocate for yourself. If you don’t, the card companies are just as happy to take your money at the higher rate. 


LendingTree offers these suggestions if you plan to ask for a lower rate: 

How to ask for a lower APR

Before you make the call, come armed with ammunition in the form of other offers you’ve seen at a site like LendingTree.com or that you may have received in your snail mail. Take that offer and use it to frame the conversation: 

“I’ve been a good customer of yours for a long time and I like my card. However, the APR is 25% and I’ve just been offered one with a 19% APR. Would you be able to match it?” 

As survey data shows, they’ll likely be willing to work with you, at least to some degree.

RELATED: ‘ I was very grateful’ | WCNC Charlotte breaks through red tape to help woman get money she was owed

How to ask for a waived annual fee

Before you make the call, think about what you will accept. If you ask for a fee to be waived altogether and they only offer to reduce it, is that good enough? What if they offer you extra rewards points or miles or make some other counteroffer instead of a reduced fee? And perhaps most important, what if they say no? 

As with many negotiations, you have more leverage if you’re willing to walk away, so that could be an option. However, you shouldn’t make that threat unless you’re willing to follow through with it, and you shouldn’t follow through with it unless you’ve thought about what that would mean for your credit.

How to ask for a waived late fee

Just pick up the phone and be polite. If you’re a long-time customer with good credit and this is your first offense, the odds are in your favor. In fact, some card issuers will even waive a first late fee as a matter of policy. If you’ve been late multiple times in the recent past, however, your chances probably aren’t as good. Even so, it never hurts to ask.

How to ask for a higher credit limit

Start with a number in mind based on your current limit. The average increase reported in our survey was about $1,500, but your situation will vary. If your current limit is $500, a $1,500 bump might be asking too much. However, if your current limit is $5,000, that request might be just fine. 

Think about why you’re asking for the increase — for some extra spending power or to help your credit score — and then decide what to ask for. Just remember that it’s always better to start a negotiation by asking for a little too much. That way, when you negotiate, you can give a little bit and still get what you want.


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Can A Moving Loan Help Your Relocation? Find Out Here – Forbes Advisor

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Editorial Note: Forbes may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations.

Whether you’re relocating to another city or state, moving can be expensive. You might need money to pay for a moving van or movers, new furniture or your security deposit. If you don’t have money on hand to cover those expenses, a moving loan can help you fill in the gap.

Before you take out a relocation loan, learn what they are and how to compare your options to understand if it’s a good choice for your situation.

What Is a Moving Loan?

A moving loan—also referred to as a relocation loan—is an unsecured personal loan you can use to help cover your moving expenses. Unsecured loans don’t require you to use a personal asset to secure the loan. Because the loan is unsecured, lenders base your eligibility on factors like your credit score, income and debt-to-income (DTI) ratio. Like with other types of personal loans, you’ll have to repay your loan through fixed monthly installments.

When Should You Get a Moving Loan?

Although the answer varies based on your financial circumstances, it may make sense to get a moving loan if you can secure a good interest rate and can afford to repay the loan as promised. However, if you believe it might be hard for you to repay the loan, then it’s probably a good idea to avoid taking one out. Falling behind on payments can damage your credit score, making it harder for you to qualify for future loans.

How to Get a Moving Loan

  1. Search for lenders: To find lenders that offer relocation loans, search for the best personal loans online. A good place to start might be a lender comparison website. While there, carefully review the terms, minimum credit score requirements, fees and annual percentage range (APR) range of each lender. In addition, you can check with your local bank or credit union to see if it offers personal loans for moving.
  2. Prequalify with multiple lenders: Once you narrow down your list of the best lenders, prequalify with each one of them (if available). This allows you to see what terms and APR you might receive if approved. Make sure the lender does a soft credit check to protect your credit score from any pitfalls.
  3. Determine the amount you need to borrow: Estimate your moving or relocation expenses to see how large of a loan you need to take out. Different lenders have different minimum loan amounts. Also, some states have rules about the minimum amount you can borrow, which may affect the size of your loan.
  4. Apply for your moving loan: After you select the lender that matches your needs, complete the application process. Prepare to provide the lender with personal information, such as your income, date of birth and Social Security number (SSN). Some lenders will require you to provide W2’s, pay stubs or bank statements to confirm your income.
  5. Wait for the lender to make a loan decision: After you apply, wait for the lender to review your application. Some lenders might approve you within seconds, while others may take longer. If a lender denies your loan, ask them for an explanation. Applying with a co-borrower or co-signer, improving your credit score, reviewing your credit report for errors or requesting a smaller amount may improve your chances of approval.
  6. Sign the loan agreement and receive funds: Once approved, the lender will send you a loan agreement to sign. After you sign the agreement, the lender will most likely deposit your funds directly into your account. The time of funding varies for different lenders—some lenders can issue the funds the same day while others may take a week or longer.
  7. Repay your loan: Finally, repay your loan as promised. Making late payments or defaulting on the loan can damage your credit score. Setting up autopay is one way to ensure you’ll never miss a payment.

Pros of Moving Loans

  • Quick access to funds: If your loan application is approved, some lenders may deposit your funds into your bank account the same day or within a week.
  • Flexible loan terms: Some lenders allow you to take out personal loans for moving with loan terms as short as 12 months and as long as 84 months. A long-term loan may have a lower minimum monthly payment, which might better suit your budget. However, the downside is that you’ll pay more in interest over the life of the loan.
  • Lower interest rates than credit cards: The average interest rates for personal loans are usually lower than those for credit cards. If you have a good credit score (at least 670) and a stable income, you may be able to secure a good interest rate—an interest rate that’s lower than the national average.
  • No collateral required: Since loans for moving typically require no collateral—an asset that secures the loan—you won’t have to worry about a lender taking your asset (at least without a court’s permission).

Cons of Moving Loans

  • Fees: Some lenders charge origination fees between 1% and 8%—these fees can be a huge drawback since the lender usually subtracts them from your loan amount. Other common personal loan fees include application fees, returned check fees, late payment fees and prepayment fees.
  • Potentially high interest rates: If you have less-than-stellar credit or minimal credit history, your lender may charge you high interest rates. Some lenders have APRs above 30%.
  • Missed payments can damage your credit score: If you miss a payment or default on the loan, it can damage your credit score. This will make it more difficult for you to qualify for future loans.

Moving Loan Alternatives

If you want to avoid the potential cons of a relocation loan, consider these alternative options to help cover your moving expenses or rent.

0% APR Credit Card

Borrowers with good to excellent credit scores (at least 670) can avoid paying interest and high fees with a 0% APR credit card. These cards come with interest-free promotion periods, which can last for up to 21 months. If you pay off your balance before the promotion period expires, you won’t have to worry about paying interest. However, providers will charge interest on unpaid balances once the introductory period ends.

Family Loan

Family loans are another way to avoid paying interest or to pay minimal interest when it comes to your relocation expenses. With this option, you can also avoid the formal loan application process. The loan agreement between you and the family member should spell out the terms and conditions of the loan. Repay the loan as promised to avoid causing damage to your relationship.

Payday Alternative Loan

If you can’t qualify for a relocation loan or have trouble finding moving loans for bad credit, consider using a payday alternative loan. Some federal credit unions offer these loans, which are designed to help you avoid the high-interest charges of payday loans. You can borrow up to $2,000; loan terms range from one to 12 months and the maximum interest rate is 28%. To use this option, you must be a member of a federal credit union or be eligible for membership.

Savings

Instead of using a personal loan for moving, it might be better to use your savings, if possible. If you know how much it will cost, then create an automatic savings plan to cover most or all of your relocation expenses.

Relocation Package

If you’re moving for a new job, ask your new employer if it will cover some of your relocation expenses. Some employers offer this to employees as an incentive to accept the job offer. Even if the employer doesn’t offer this, you can ask for a relocation bonus or try negotiating a higher salary.

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