Online Personal Loans for People with Bad Credit

Samantha Waites
November 10, 2020

Online loans are those you apply for online instead of walking into a bank and filling out an application or filling in and mailing back an application you received in the mail. There are a number of reasons to apply for a personal loan online, especially if you have bad credit. However, there are potential risks as well. Let’s take a look at both the benefits of online personal loans for those with bad credit and the mistakes you'll want to avoid making.

Don't Rush

This may be the hardest advice to give to someone in need of a cash infusion. You need the money, or else you wouldn't be researching online loans. Yet this urgency is what can cause people to make mistakes, and scammers will take advantage of this. Before you apply for a loan online, research what other options you have. Is there something you can sell? Are there savings you can tap into? If the answer to both of these questions is no, then you still need to do your due diligence.

Shop Around for the Best Loan Terms

If you have bad credit, lenders will take advantage of this by charging a very high interest rate, charging high fees, or doing both. This is why those seeking personal loans for people with bad credit must shop around.

Don't pick a loan with a low teaser rate that jumps up to 30 percent or more after the first few weeks. Don't choose a loan with a good interest rate that makes up for it with loan origination fees, high late fees or a steep annual fee. You may want to find lenders that offer loans to people with less than perfect credit, because they'll more accurately assess your personal risk profile. This is in contrast to large financial institutions that will either charge you the highest possible interest rate or refuse to do business with you altogether.

Know the Red Flags

There are a number of red flags that should make you close the site and never return. Do they say that they'll guarantee approval? No real lender will promise that, so stay away. Do they say they won't run a credit check? This is another red flag. Even lenders who offer loans to those with bad credit want to verify your credit. After all, they don't want to issue a loan to someone about to go through bankruptcy or committing identity theft. Legitimate lenders may charge an application fee or credit report fee. However, they should either post the modest application fee on the website with an explanation of what it is for (running your credit report, processing an application) or simply take it from the interest you pay on the loan balance.

A real online lender may charge a $20 fee to process the loan, but no one will demand $200 so they can send you $2,000. And most lenders will not require any fees to be paid up front.

Vet the Business Before You Sign Up

There are many scammers who will take advantage of desperate people. And online loan applications are the perfect funnel for identity thieves, since you have to provide your personally identifiable information and at least one bank account number. Do your research before you sign up for a loan with a given online lender. Make certain it is a real lender, and verify that you're going to the actual website of said lender. Don't bother reading the testimonials on their website. Read the reviews about them on customer complaint sites. Too many people rush through the terms of service, though this is a contract. Does the business often change the rules, sticking people with fees or a stepped up interest rate? Are there hidden fees and extra charges buried in the terms and conditions, while the interest rate is promoted on the front page of the contract?

Look at the business website. If they don't have a physical address, this is a major red flag. Banks and other financial services have at least one office, though it may be located in another state. If the lender doesn't have a physical address or only provides a post office box, don't give them your information. If they have a physical address, you may want to search for it. A lender located in an office building is probably legitimate. If there are 30 other lenders based out of the same strip center, it is probably a scam.

If the website itself is not secure, don't enter your personal information. This may be a sign that it is a scam, or hackers may have compromised the site to steal your information. If the website triggers your computer's anti-phishing or malware blocker, close it and don't go back. If the loan website has some sort of countdown or promises a deal that only lasts for the next few hours, it is a scam. Real lenders don't have bargains and deals. They have relatively constant interest rates that only fluctuate with the rate of inflation and the borrower's risk profile. Fee waivers may be available, but those are not going to be available for a short time.

Understand the Repayment Options

Is it a secured loan or an unsecured loan? Do they want to sweep your bank account after your next paycheck, or can you make payments when you can? Note that if the lender asks you to make payments via prepaid debit cards or send a check to a specific person, stop and kill everything. That's a major red flag that they're scammers. Don't Bother Contacting Anyone who Contacts You Directly Don't bother clicking the emails promising fast online loans. They're rarely legitimate. Nor is the scammer pretending to be a major bank going to reach out to you the minute you're searching for online loans. Unfortunately, Big Tech companies track what you search for, and your email inbox may fill with ads and offers for online loans once you start searching for personal loans online. Don't click any of those links. They're convenient, but their rates aren't competitive. No legitimate lender is going to call you, either, promising free money.

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