Can I get a marriage loan with a low credit score so my sister can have the day of her dreams?
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Dear credible money coach,
Is it possible to get a loan for a marriage? My credit rating is low at 550 because of the foreclosure. My sister’s wedding is approaching, but we don’t have enough money.
Darshan, you are a good brother and you want to help your sister organize the wedding of her dreams. But before you get into debt, it’s important to understand all the ramifications and your options for helping your sister pay for her marriage.
First, yes, it is possible to get a personal loan for a marriage with a low credit score. But a credit score of 550 can limit your options, and that will almost certainly mean paying a higher interest rate than someone with a credit score over 700 could pay. And you may not be able to. borrow as much as you want.
What you need to know about credit scores and personal loans
Consumers have more than one credit score, but the one that many lenders commonly use is called your FICO score. Credit scores are typically between 300 and 850. Here’s how FICO breaks down the scores.
- 800+: Exceptional
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 300-579: Poor
Most personal loans lenders set minimum credit score requirements. And lenders who only want to work with borrowers who have good credit will usually set their limits high. But some lenders have lower credit score requirements, and these are the ones you might turn to if you need a loan when your credit score isn’t good.
You can usually find these lenders online. In fact, Credible partners with some lenders with minimum credit score requirements of 600 or less.
But while you can probably get a personal loan with a low credit score, there are a few pitfalls.
How a low credit score affects personal loans
Lenders may view a low credit score as a sign that a borrower is in financial difficulty and may be having difficulty repaying a loan. And most of all, lenders are looking to mitigate their risk, so they often give higher interest rates to borrowers with lower credit scores. Some lenders also limit the amount they will lend to someone with a lower credit score.
So while it is possible to get a personal loan with a low credit score, you may not be able to borrow the full amount you want. And you will almost certainly pay a high interest rate for the loan.
Don’t act out of desperation
I also want to strongly caution you against resorting to certain types of lenders who can make it easier to get money, regardless of your credit score. It will usually cost you a lot more in the long run than it’s worth.
Payday lenders and loans without a credit check often carry very high interest rates. In fact, the effective interest rate on the average payday loan is almost 400%, according to the Consumer Financial Protection Bureau. You can also be subject to high fees if you cannot pay off the loan on time, especially for payday loans, which can automatically turn into a new loan and trap you in a cycle of debt.
Additional elements to consider
The pandemic has hurt many people financially. But the jobs numbers are up, people are getting vaccinated and we are all hoping things will continue to improve. You are probably very keen to share in the joy of your sister’s marriage, but going into debt to finance it could have a lasting negative impact on you and your sister’s finances.
I urge you to consider alternatives to borrowing, even if it means cutting your wedding budget or planning a larger event once everyone’s finances recover from the pandemic. Debt is the last wedding gift any bride should want.
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About the Author:
Dan Roccato is a clinical professor of finance in the School of Business at the University of San Diego, Credible Money Coach personal finance expert, published author and entrepreneur. He has held leadership positions at Merrill Lynch and Morgan Stanley. He is a recognized expert in personal finance, global securities services and corporate stock options. You can find it on LinkedIn