The 7 Best Short Term Loans for Bad Credit
When you're in a financial bind and need a quick infusion of cash, a short-term personal loan can be a lifesaver. While there are potential drawbacks to be aware of, you can usually get this type of loan even if you have bad credit.
The 5 Best Short Term Loans for Bad Credit
Unfortunately, a bad credit score can make it tough to get a loan when you need one. If you've been turned away from traditional banks, it's worth looking online for a short-term personal loan from lenders willing to work with people who have imperfect credit.
MoneyMutual is a loan marketplace, which means it does not service or fund loans on its own. Rather, it allows potential borrowers to submit a single application to lenders in a network on the MoneyMutual site.
If a lender reviews your initial application and decides to make you an offer, you can choose to pursue a loan. The MoneyMutual site is free to use, and there is no obligation to move forward with a loan offer.
You can borrow as much as $2,500, but borrowers with very low credit scores or a poor credit history are unlikely to qualify for this high of a loan amount. According to reviews posted online, most borrowers tend to qualify for a loan around $1,000 or so.
While each lender has its own qualification criteria, applicants should be at least 18 years of age, earn a minimum of $800 each month, and have a checking account. Loan terms for MoneyMutual vary.
CashAdvance.com is an online loan marketplace, so it doesn't fund any loans directly. Like other loan matching sites, it features a network of lenders that work with people who have bad credit to offer emergency payday loans.
Borrowers can get loans ranging from $100 to $1,000 through CashAdvance.com. The site is operated by Hawk, LLC, which is owned by the Ute Indian tribe.
Tribal lenders are not bound by the laws that govern non-tribal lenders, so they can usually offer loans with higher interest rates. While this can help borrowers with truly poor credit get a loan, it's important to note that the interest rates can be extremely high.
For example, the loan repayment calculator on the CashAdvance.com site features a loan example with an interest rate ranging between 782% and 1564%. To avoid accumulating late fees or interest, be sure you are able to repay the loan as agreed before signing on.
There is no minimum credit score needed to apply for a loan, but borrowers must bring in at least $1,000 a month in income or other earnings. In addition, CashAdvance.com loans aren't available in every state, so it's important to check which locations the site serves before you apply.
Loan terms for CashAdvance.com vary.
CashUSA.com is another loan network, so it doesn't actually fund or service any loans itself. However, the lenders in its network offer a range of loan types, including short-term loans, installment loans, and peer-to-peer loans.
If a low credit score is holding you back, the lenders in the CashUSA.com network might be willing to work with you. Many of the lenders in the network are Native American tribes, which means they aren't bound by some of the stricter lending laws that stop non-tribal lenders from charging interest rates over a certain percentage.
You can ask for a loan between $500 and $10,000, however, borrowers with low scores probably won't qualify for the maximum loan amount. Applicants must be at least 18 years old, be an American citizen or legal permanent resident, earn at least $1,000 a month, maintain an active checking account, and prove they've been employed for the past 90 days or more.
Loan terms for CashUSA.com are 3 to 60 months.
BadCreditLoans.com is a loan aggregator or marketplace that matches borrowers with lenders in an online network. If you have bad credit, you may be able to find a lender willing to give you a short-term loan, with quick funding.
The lenders in the BadCreditLoans.com network charge interest rates between 5.99% and 35.99%, with payment terms starting at 90 days and extending up to 36 months. The maximum loan amount is $5,000, and it costs nothing to apply for loans through the site.
Borrowers need to meet a few criteria to apply. You must be at least 18 years old, be a U.S. citizen or permanent resident, maintain an active checking account, have a working phone and valid address, and be able to verify your employment.
PersonalLoans.com is an online loan marketplace that allows borrowers to shop around for the best deals on short-term loans up to $35,000. Interest rates vary, with most lenders charging between 5.99% and 35.99% depending on a borrower's creditworthiness.
Monthly loan terms in the PersonalLoans.com network range between 90 days and 72 months. Like other loan marketplaces, PersonalLoans.com does not charge a fee for submitting an application.
Best Credit Cards for Bad Credit
When you're in need of quick cash, it's always good to have a few backup plans. If taking out an actual loan doesn't seem like the best option for what you really want or if your credit is not up-to-par enough to get approved for one, then financing through a credit card might be worth considering.
Unlike short term loans where interest rates are high and can almost double the amount that was borrowed over time, using a credit card has its perks, such as lower interest rates on some cards.
There may be minimal fees associated with these card issuers, but they still offer better options than traditional banks when needing access to emergency funds quickly without having them tied down by excessive interest charges.
5 Things to Know About Short Term Personal Loans for Bad Credit
Before you take out a short-term loan, it's important to understand all the pros and cons that come with these types of loans. Short-term loans offer plenty of benefits when you need quick access to cash for an emergency, but the typically high interest rates can trap you in a cycle of debt if you're not careful.
- Generally easy to get - For many borrowers, bad credit isn't necessarily a deterrent to getting a short-term loan. Because many short-term lenders rely on information besides your credit score when making lending decisions, a low score won't hold you back.
- The convenience of applying online - Many lenders that offer short-term loans operate online, which means you have more options when it comes to borrowing. As long as you have an active checking account, you can usually have your money direct deposited in your account within a day or two.
- May help you build credit - Many lenders that give short-term loans will report your monthly payment activity to the three major credit bureaus: Experian, Equifax, and TransUnion. This can be a big plus when you need to repair your credit score. Not all lenders that offer short-term loans report to all three bureaus, however, so it's important to confirm whether your lender reports payment activity before you apply for a loan.
- Be wary of very high interest rates - Because many lenders that offer short-term loans approve people who have bad credit, they also charge much higher interest rates and origination fees compared to lenders with stricter approval criteria. Before you sign up for this type of loan, make sure you can afford to pay it back.
- Can be habit forming - For some people, one short-term loan leads to another and then another and another, creating a cycle that ends in a financial disaster like bankruptcy or a court judgment. This happens when the borrower can't repay the original loan and ends up taking out a new short-term loan to cover the first one. This happens because some short-term lenders allow borrowers to roll their debt into a new loan, forcing borrowers into paying exorbitant amounts of interest. A report from the Consumer Finance Protection Bureau (CFPB), states that the average short-term loan borrower will refinance a loan nine times a year, paying $458 in fees on average.
How to Get Short Term Personal Loans for Bad Credit
Most people rely on short-term loans (or payday loans) to cover unexpected and emergency expenses. These types of loans are really designed to be repaid over a short period of time, such as a couple weeks or a few months.
On the downside, short-term loans tend to come with high origination fees and even higher interest rates. Because you can usually get these types of loans even with bad credit, lenders charge more to mitigate the risk they take on by lending money to borrowers with statistically high rates of defaulting.
Fortunately, the internet has made it easier than ever to get a short-term loan for bad credit. There are many online lenders that offer short-term loans, which means borrowers have access to a wide range of options.
Loan marketplaces make it easy to compare offers from several lenders, and you typically only need to submit one application to receive a number of offers. Once you choose the offer that best suits your needs, you'll likely need to provide the individual lender with additional information, such as verification of your employment.
After the lender approves your application, it will typically transfer the loan funds to your bank account within one or two business days, with some lenders taking a little longer. Keep in mind that some lenders deduct fees from the top, which will decrease the amount of money deposited in your account.
6 Tips for Using a Short Term Personal Loan Responsibly
If you're not careful, you can become dependent on payday loans to bridge the gaps between paydays. This can wreak havoc on your finances, as well as further damage your credit score.
If you're going to take out a short-term loan, it's important to use the funds responsibly and pay the loan back as soon as you can. Here are some tips for using these types of loans in a responsible way.
1. Know Your Credit Score Before You Apply
If you're applying for a short-term loan with bad credit, you're likely to encounter quite a few lenders that don't check your credit before approving you for a loan. While some will pull your credit file, others only require you to prove steady employment and a minimum monthly income.
However, this doesn't mean you should borrow money without knowing your score. Furthermore, if you're applying for loans and continuously getting rejected, you could be accumulating hard inquiries on your credit report that do additional damages to your credit score.
Knowing your credit score and understanding what's in your credit report can help you take control of your finances. Before you apply, order your free credit reports and carefully review them to make sure they don't contain any errors or inaccurate information.
2. Only Borrow if You Can Repay the Loan
You should never take out a loan if you're not sure you can afford to repay it. Defaulting on a loan will only further damage your credit score, making it more difficult for you to get a loan in the future.
Remember that most short-term loans for bad credit have high interest rates, making them hazardous territory for someone with a history of debt. If you're not certain you can pay back the loan on time, it's better to look for alternative sources of funding, such as a personal loan from a friend or relative.
3. Compare Loan Offers From Various Lenders
Don't scoop up the first loan offer you receive. Take the time to carefully review all your loan offers, including interest rates and origination fees, so you can be confident you're getting a fair shake.
This is why many people like working with a loan marketplace, where you can get loan offers from multiple lenders at a time. This saves you considerable legwork and research, as the loan offers are delivered to you.
Even better, you can usually preliminary receive loan offers from multiple lenders without any hard pulls on your credit. This helps you avoid doing any damage to your credit score while you shop around for the best deal.
4. Make Sure You Really Need the Money
Make sure a short-term loan is something you absolutely need. Keep in mind that taking out any type of loan is going to come with interest, and short-term loans for bad credit are among the most expensive types of loans you can get.
Before you take out this type of loan, consider why you're borrowing the money and whether it's for a legitimate reason. For example, are you covering the cost of a car repair, or are you borrowing because you want to splurge on a new wardrobe?
In short, you should only take on a short-term, high-interest loan if you truly need the money to cover a real emergency.
5. Don't Overborrow
You might be able to borrow more than you need, but you should avoid taking on a large loan amount just because you qualify for a higher amount. The extra funds might be a nice thing to have, but keep in mind that you'll have to pay interest on the money.
In addition, taking on more debt can hurt your credit utilization, which is the ratio of how much available credit you have versus how much debt you owe. While financial experts recommend keeping this ratio below 30 percent, it's best to keep it as low as possible.
6. Look for Other Sources of Funding
A short-term loan may not always be the best way to get emergency cash. Before you borrow, try to think of other options.
Some other ideas for quick access to funds include borrowing from a relative or trusted friend, selling some items you no longer need, or opening a credit card with a reasonable interest rate for the loan amount you need.
If your budget can't handle an unexpected expense, a short-term loan may be a good way to tide you over until your finances improve. Before you borrow, however, it's important to make sure you understand all the loan terms, rates, and origination fees.
About the Author
Mike is a recognized credit expert and founder of Credit Takeoff. His credit advice has been featured in CNBC, Investopedia, CreditCards.com, Bankrate, Huffpost, The Simple Dollar, Reader's Digest, LendingTree, and Quickbooks. Read more.