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Bad Credit Personal Loans - Up To $5,000

By definition, "personal loans" are made by banks and other institutions, to individuals only, not corporate entities, and usually without pledging any security.  They are secured only by your signature on a promissory note to repay. By contrast, secured loans require collateral, meaning if you default on the loan, you give the lender the right to take back the collateral that you pledged. Below, we will elaborate a bit more on the differences between various loan types, and how you can get approved even with bad credit. Plan future payments with our loan calculator.

First Choice connects you with the right lender for your needs. The process is simple, with immediate acceptance in most cases. Although approval is not guaranteed, you will be simultaneously considered for a payday loan alternative in the event that you do not qualify. To qualify for loans of $10,000 or more, good or excellent credit may be required. If your credit score is lower, short term cash loans are available.

  • Bad Credit is OK
  • Unsecured Installment Loans
  • Terms up to 60 months
  • Instant online acceptance


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What is a Personal Loan?

When you take out a loan, you borrow an amount of money for a certain period of time and pay interest on the outstanding principal balance. Generally, they are unsecured, which means there is no collateral. They are often acquired to make a specific purchase or to consolidate other high interest loans into one monthly payment. Most are obtained from a bank or a credit union.

A line of credit is a common alternative to an installment loan. Upon approval, the lender establishes a maximum amount that you may borrow (your credit limit). You may borrow what you need, as you need it, in any amount, as long as your outstanding principal balance does not exceed your limit. As you pay down the balance, you can borrow more, up to your limit. Most credit lines are unsecured, but some are collateralized with property, such as your home. Typically, there is no fixed repayment period as long as you make the minimum monthly payments.

Interest rates are typically lower than credit card rates. If your line of credit is with a financial institution, you likely access it with a check, a debit card, a withdrawal slip, or a simple intra-bank transfer in your online account, moving the money that you need directly from your line of credit to your checking account.

Qualifications, Rates, and Repayment

Depending upon the amount you wish to borrow, anyone with a steady income can apply for and obtain a personal loan or line of credit. You must demonstrate to the lender that you have the ability to make regular monthly payments on the debt. Most banking institutions will set you up with a line of credit attached to your checking account, often called an overdraft line of credit. This allows you to write checks for more than your checking account balance, although any amount in excess of your checking account balance must be repaid with interest. Most banking institutions also offer loans to their established customers. They are easier to qualify for if you have established credit.

What Can You Expect?

Loan terms, including the amount and APR, depend on several factors, including income and credit worthiness. Loan amounts generally range from $1,000 to $35,000; higher loan amounts will require proportionally better credit scores. Annual percentage rates (APR) for long-term loans range from 9.00% to 39.00%, with durations of 12 to 60 months.

Most banking institutions offer lower interest rates for personal loans and lines of credit than they do for credit cards. Interest rates tend to be about 2 percent lower than credit cards. This makes borrowing money cheaper. However, as with auto financing, interest rates can vary greatly from lender to lender. Before deciding on a lender, we recommend contacting several institutions to compare programs and to get an idea about the going rate.

If you obtain a loan from a financial institution where you also have a checking or savings account, be advised that the money in these accounts may become vulnerable. In certain circumstances, financial institutions have offset rights. This means that if you default on your loan, the lender has a right to take money out of your checking or savings account to satisfy the debt. The financial institution can do this without your permission. The old rule of thumb is: Never borrow where you save.

What Scores are Characteristic of a Bad Credit Loan?

Bad Credit -- 580 to 650

When your credit score falls below 700, potential lenders start to look critically at the details of your credit report. You'll still qualify for a reasonable number of loans, but it's unlikely that you'll get good rates. Higher interest rates translate to a more expensive loan, but when in financial distress, the need for money outweighs the cost in a cost-benefit analysis. After all, you have to pay the bills that keep the lights on and put food on the table.

When you obtain your loan, be sure to prioritize payments such that the most important come first, and never attempt to pay off a debt in full with an expensive personal loan. Pay what needs to be paid, and put the excess in your savings account for next month. Focus on reducing your debt and making payments on time, and you should be able to bump your credit score back up over the next several months.

Very Bad Credit -- 300 to 579

When your credit score falls below 600, you may find it extremely difficult to get a loan from banks and traditional means. If your credit score could be better, don't panic; it's not that hard to improve your credit with simple fiscal budgetary modifications and lifestyle changes. What you should be focusing on is reducing your debt, paying off any accounts that have been turned over to collections, and making future payments on time. Most people with very-low credit will benefit from speaking with a credit repair specialist, who can help you rebuild your credit history and fix your credit score.

Note: The ranges and their classification are subjective, and vary from lender to lender. Some lenders focus their efforts on attracting the business of consumers with scores in the lowest range, so obtaining a loan is not impossible by any means.

Personal Loan Calculator

With this calculator, you can analyze an existing loan or potential scenarios for a future loan. If you know your credit score, you can adjust the expected APR up or down. You can also use our credit score estimation calculator. All of this information will help you plan and budget your finances.

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If I Have Bad Credit, Can I Get an Unsecured Disaster Loan?

Yes. You can apply for financial assistance from various state and local government disaster relief programs, even if you have insufficient credit for traditional loans. If you don't have insurance, or your insurance is inadequate, you may be eligible to receive a low-interest loan from the Farm Service Agency (FSA) or the Small Business Administration (SBA). Cash grants are available from FEMA if for some reason, you don't qualify for a loan. For more information on disaster relief programs, contact the American Red Cross or FEMA.

Tip: When the time is right, make sure you add fraud alerts to each of your credit reports. You need to do this immediately following a disaster, although we really recommend that you do this all the time irrespective of a disaster. In fact, do it today if you can. A fraud alert is simply a message that you ask the credit reporting agency to place at the top of your credit file asking all potential creditors to contact you before giving anyone credit in your name based on an application that they receive. After a disaster, this is especially important because some of your personally-identifiable information may have blown into the hands of an id thief, via the winds of a hurricane or tornado. So having a fraud alert on your credit file is one way to protect yourself from identity theft and to protect your credit history.

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What is a Secured Loan?

When you borrow money, the lender may or may not require you to pledge collateral to guarantee repayment of the debt. If collateral is pledged, then you have a secured loan. Collateral can be anything of value, but remember cash is NOT collateral -- lenders do not require you to send cash as collateral or "insurance", so beware of anyone telling you to wire them money to "secure" a loan.

Your home's equity is one of the best sources of cash, especially for consumers with low credit scores. For homeowners, interest rates are often quite low. With equity, you can finance big-dollar expenses, such as car purchases, home remodeling, or medical expenses. Of course, you are funding these things with a secured loan if you chose to use equity; your home is the collateral. But, if you have the discipline to make the payments, you can save a lot of money over using credit cards.

Remember: On a secured loan, If you do not repay what you borrow, then the lender may use your collateral to satisfy the debt. Equity is an often overlooked source of money, and is a great way to pay for things you need. Equity is much more cost efficient than high interest credit cards. But make sure you can make the payments, on time, every month.