Your credit score plays an important role in your ability to obtain a personal loan. You may not have the best credit score and wonder, can I get a loan with bad credit? The answer may surprise you.

When online lending first popped up online in 2006 lenders were touting proprietary credit models that assessed risk better than traditional brick and mortar lenders. They also set a minimum credit score of usually around 640 as a cutoff to obtain a loan. Well 14 years later, in order to obtain a personal loan with a rate under 36%, the maximum allowable rate under a national banking charter, you still often need a credit score fair or better (640+) range. This is due to the way personal loan lenders assess risk, and set APR’s accordingly. Lenders must be able to provide you with an interest rate than is higher than the average default rate of their unsecured loans so that their bank or investors who are actually providing the capital can make money. That might be too much inside baseball for right now, so let’s move on to the question at hand. 

What is bad credit exactly?

Simply put, bad credit is a credit score is below 600 according to Experian. The reason your credit score is low is really the heart of the matter we need to dissect. Most likely, there are some skeletons in your closet possibly through no fault of your own. A low credit score is probably due to some payment obligations that didn’t fully get resolved how you would have liked them to. You may have some past due bills, defaulted items, or had a bankruptcy, lien, or judgement. Perhaps you had a medical issue that was beyond the budget your would have expected which is an all to common occurrence in the US these days. Your credit score is largely a reflection on your payment history and your debt amounts you are paying off. 

What type of loan can I get with bad credit?

When you have bad credit, you can expect to receive an interest rate over 36%. It’s important not to use these loans for debt consolidation.