Subprime Personal Loans

What credit score is needed for a subprime loan?

While each lender will have different guidelines for what they consider subprime, according to the Consumer Financial Protection Bureau, a credit score between 580 and 619 is considered subprime. However, different reporting agencies might have different guidelines. For example, VantageScore considers anything up to 600 subprime or below 670 from Experian. Lenders that deal with subprime loans often consider a variety of requirements from credit score to income to determine eligibility. To find out if you qualify, get prequalified. 

Are subprime loans only offered by banks?

You can find subprime loans from a wide variety of lenders, including banks (both traditional and online), credit unions, and even the government through FHA loans and more. These are meant to provide second chances to those who need money or to finance a purchase but aren’t eligible for many mainstream loans due to their poor credit score. 

What are examples of subprime loans?

There are three different types of subprime loans available for borrowers — subprime mortgages, subprime auto loans and subprime personal loans. Each serves a different purpose and are available to individuals who might not otherwise qualify for loans to give them access to large purchases like a car or house, or access funds for an emergency. 

Subprime mortgages are available to those looking to buy a house but don’t quite have the credit requirements necessary. With a subprime mortgage, it’s not uncommon for the length of the loan to be 40 or 50 years compared to the standard 30-year fixed-rate mortgage. In these scenarios, a borrower could and will likely pay more interest over the length of the loan and face a higher interest rate than a prime mortgage. 

For a subprime auto loan, you could face higher interest rates and potentially prepayment fees if you pay your loan off ahead of schedule. Cars that are repossessed are commonly from subprime borrowers who are unable to make their monthly payments. 

Lastly, subprime personal loans can help you get out of a financial emergency or timely need for money, but can also be an expensive way to borrow money. While they’re available for urgent situations, borrowers should really weigh the pros and cons to ensure they’re able to make payments regularly and won’t fall behind on their payment schedule. 

What can you use subprime personal loans for?

As with any personal loan, you can use a subprime loan for a wide variety of uses. Some popular uses include consolidating other debt, paying for home improvements, financing a large purchase or paying an emergency bill or unexpected cost. While there are usually no restrictions around what you can use them for, any debt you add should be used responsibly to avoid any other financial trouble. 

Subprime personal loans are a quick way to get access to the funds you need, but they should be used responsibly. With the right subprime loan and on-time payments, you can potentially increase your credit score and work towards improving your financial situation.