How to get a personal loan with bad credit

Your credit score doesn't have to stop you

You can take out a personal loan for any reason, if you can qualify. You will then have to make monthly payments until the loan (plus interest) is paid back in full. These monthly installments are written in the loan agreement.

The annual interest rate on personal loans can range from 6% to 36%. Generally, the lower your credit score, the higher your interest rate.

If you're concerned about not qualifying, there are six methods to get a bad credit personal loan:

  • Method 1: Be patient and increase your score
  • Method 2: Try a Secured Loan
  • Method 3: Get a cosigner
  • Method 4: Borrow from friends or family
  • Method 5: Talk to the Lender
  • Method 6: Find a Bad Credit Lender
  • Why should you ask for a personal loan?
  • What you need to know before getting a personal loan
  • How will having bad credit affect the personal loan process?
  • Alternatives to personal loans for debt relief

Method 1: Be patient and increase your score

This is the best method. It won't work if you need money right away

Waiting and working towards a good credit score can get you a better interest rate and save you money in the long run. Start by taking a look at your credit report and find out where you can improve. Even if it takes a while, you'll be surprised how many more opportunities open up when you have a better credit score.

Do you need a little extra help to increase your score? SmartCredit guides you through the credit building process, all in one easy-to-use platform.

To improve your score, you need to know how it is calculated. Your credit score is made up of 5 factors: credit history, credit utilization, age of credit, new applications, and types of credit.

Method 2: Try a Secured Loan

Like secured credit cards, a secured loan gives your lender the assurance that he will pay back what he owes by requiring him to borrow against an asset.

These assets can include your home equity, your retirement account, savings, or even your car. A secured loan is nothing to take lightly . You risk losing an important asset if you can't afford it. If you end up taking this route, be very careful to repay the entire loan amount and make your payments on time. You can lose important assets if you do not repay this loan.

For example, let's say you use a Home Equity Line of Credit (HELOC) loan to pay off your credit card debt. If you don't pay it, the bank could foreclose on your house. If you are already struggling with debt, this is the last thing you need.

Method 3: Get a cosigner

Sometimes a lender will allow you to take out a loan with a bad credit score if someone with a good credit score acts as a cosigner.

Basically, when someone signs a loan, they agree to pay back the money they lend you if you can't pay it back. This can be a great compromise. Give your family member or friend time to think about it after you ask them to be a co-signatory.

A close friend or family member can be your co-signer, or they can help you with Method # 4…

Method 4: Borrow from friends or family

Just make sure you make a plan to give back what you were given.

Put everything in writing, from when payments are due, how much each payment will be, to the length of the loan terms. Not paying a personal loan can hurt your finances, but not paying a friend or family member can hurt your relationships.

Before borrowing from someone close to you, establish some rules:

Method 5: Talk to the Lender

Lenders are human too

There is a chance that if you have an honest conversation with them about your credit status and your ability to pay off the personal loan, they might reconsider your initial rejection. Also, you may be able to prove your creditworthiness in other ways. Bank statements, W-2s, a list of your assets or unsecured debt, or even a statement from your savings account or other bank account could help you show lenders that they can trust you. pay.

Method 6: Find a Bad Credit Lender

Some lenders intentionally focus on lending to poor credit consumers

If you can't qualify for a traditional loan, you can work with a different lender who can approve you. They may be able to get you a personalized set of loan offers specifically tailored for people with bad credit, based on your current financial situation. Be sure to check with online lenders as well, they are generally more lenient.

However, beware of scams. Predatory lenders often take advantage of people with bad credit scores who really need a loan. Read all the terms of the loan before signing to make sure you are not accepting outrageous interest rates or dubious rules.
Why should you ask for a personal loan?

There are many good reasons why you may need a personal loan. Some examples include paying for a wedding, financing a major purchase, and consolidating credit card debt .

Sometimes you can even use a personal loan to improve your credit. How? Well, there are a few different effects that a personal loan can have on your credit report. One of them is that you will improve your credit mix by adding a different type of account to your report. The second thing is that it will improve your credit utilization ratio by displaying a larger total credit limit. But be careful - unless you make all your payments on time, these positive points can be canceled out by refusal to make late payments.

If your goal is to improve your credit, there is a simple way you can borrow yourself instead of taking out a personal loan. Self [ENG] allows you to create a “loan” with your own money, and build your credit score by paying yourself in monthly installments. The money you receive is used to open a CD (Certificate of Deposit) for a small investment that earns interest over time. This way, you can save and build credit at the same time.

What you need to know before getting a personal loan

If you are trying to get out or avoid debt, personal loans are often not your friend. They can have high interest rates, and especially if you already have bad credit, they can be very risky if you can't pay the debt. Before taking that leap, here are some things to know:

Only borrow what you can afford with your next paycheck

Taking out more than that will make it harder and harder to pay it back as interest accumulates on the remaining balance. Not sure how much you can really afford? Use our personal loan calculator [ENG] to find out.

Predatory lenders are everywhere

Just because someone lends you money doesn't mean they are doing it with good intentions. Be wary of payday loans and short-term loans.

Get multiple quotes

Chances are, you won't find the best financial institution for you on your first try. Shop around and try to get the best loan deal you can.

Look for the lowest interest rate you can find

Interest on personal loans may catch up with you before you know what happened. It is difficult to get a good interest rate with a bad credit score, so try to find the best rate you can.

Only get a personal loan if it is absolutely necessary

It's often best to avoid a personal loan altogether if you can't pay it off.

How will having bad credit affect the personal loan process?

It is difficult to qualify for any type of loan when you have a bad credit rating. Personal loans are no different. If your score is in the 500s or even 600s, expect high interest rates if you can qualify for a personal loan.

Trying to obtain a personal loan with a low credit score can feel like an uphill battle. It is difficult to qualify for any type of loan if your credit score is below 580 because with such a low credit score, lenders do not trust you to repay the loan.

Alternatives to personal loans for debt relief

Not sure if a personal loan is the right way to go? Call a credit counselor for free. They can evaluate your debt and budget, and then help you decide the best debt relief method for your situation. Here are some of the other options they may suggest:

Debt management program

Through a credit counseling agency, you can enroll in a debt management program (DMP) . This lowers your interest rates and consolidates your payments into one. You can also protect your credit score if you want to preserve it.

Debt settlement

Paying off your debt means paying less than you actually owe, which hurts your credit score, but frees you from debt in a few years. You can try to take care of debt settlement yourself or through a settlement company.

Balance transfer

A balance transfer allows you to combine all your credit card balances into one new card. Although you may be charged a transfer fee, there is generally a promotional period with little or no interest for 12 to 18 months. If you can pay off your debt before this promotion ends, you could save hundreds (or thousands) of dollars in interest charges.


If you have too much debt that you think you will not be able to pay, bankruptcy may be the best option for you. It hurts your credit, but gives you a financial blank slate to start over.

Remember, if you have credit card debt, tax debt, or even want to repair your credit score, you can call us at 1-844-669-4596 and a financial expert will give you a free consultation.