Our Guide on How to Get a Loan with Bad Credit

ByG. Dautovic
February 03, 2022

Falling behind on your bills because of unexpected expenses or having too many hard searches on your credit file are just some of the many things that can lead to bad credit or low credit scores.

So what do you do when all the major lenders consider you a high risk and you need to borrow cash? If you’re asking how to get a loan with bad credit, you probably already know that your options are somewhat limited. But that doesn’t mean there is no hope. Check out our guide to get answers to your most pressing questions.

What is a Bad Credit Score?

Before we share our tips and tricks on how to take out a loan with a less-than-perfect credit score, let’s first define what exactly constitutes a poor score. At first glance, you might think that there isn’t all that much to it. However, there are a few things that may confuse you, which is why we’ll go over them.

While looking for bad credit loans, you’ll notice that loan companies usually use one of these two credit scoring systems: FICO and VantageScore.

The FICO score was created by the Fair Isaac Corporation, a data analysis company that specializes in credit scoring services. Meanwhile, VantageScore is a credit scoring model developed by the three major credit bureaus (Equifax, Experian, and TransUnion). Here are their credit scoring ranges:

FICO Score

300-579 Very Poor
580-669 Fair
670-739 Good
740-799 Very Good
800-850 Exceptional

Vantage Score

300-499 Very Poor
500-600 Poor
601-660 Fair
661-780 Good
781-850 Excellent

According to these models, anything below 630 is considered a bad credit score. Keep in mind that some lenders prefer to use their own scoring system.

Can You Get a Loan with Bad Credit?

Sometimes it may be difficult to get a loan with a bad credit score, but it’s far from impossible. When getting one of these loans you might think it’s unfair that you have to settle for a higher-than-average APR, but try to look at it from the perspective of your potential lender.

A credit score represents the likelihood of you paying back the loan – the lower it is, the higher the risk for the person or company providing the funds. Therefore, a higher APR serves as a safety net for bad credit lenders, allowing them to recoup at least a part of the cost of that loan early on.

Unfortunately, finding a reasonable APR with your bad credit score isn’t the only hurdle you’ll have to overcome. Usually, lenders will want to inspect your employment status, income, debts, and assets.

Traditional banks tend to have stricter criteria than online-only lenders, so you might want to begin your search there. No-credit check loans are probably your best option as hard credit inquiries stay on your credit report and thus reduce your credit score for a few months.

Ways to Get a Loan with Bad Credit

This part of our guide offers several useful tips that are sure to better your chances of having your loan application approved. We’ve divided our recommendations into two sections: the first part is primarily aimed at those planning their next steps in life, and the second is more suited for people that need quick access to cash.

Even though it may seem tempting to just skip over the part that doesn’t seem relevant to your current circumstances, we suggest that you read our entire guide as it’s always best to arm yourself with as much information as you can before you start browsing through bad credit loans online.

Bad Credit Score Improvements

Before you do anything else, you should take some time to assess your financial situation and see if you can increase your credit score. Here’s a list of things you can do:

Review Your Credit Reports

The three main credit bureaus aren’t perfect, which is why you should go over your credit reports regularly and dispute any inaccuracies that you discover. Know that you’re entitled to a free credit report once a year from Equifax, Experian, and TransUnion (through April 2021, the reports will be free on a weekly basis).

Pay Your Bills on Time

To secure a bad credit loan, you’ll need to make an effort to prove your creditworthiness to likely lenders. The best way to do that is to show them that you can handle money competently and that you’re capable of settling all of your financial responsibilities on time.

Manage Your Credit Cards

These are the most important pieces of advice that we could give you when it comes to your credit card usage:

  • Reduce your credit card balance. Try to keep it below 30% of your credit card limit.
  • Don't close old credit cards. Your odds of obtaining loans with bad credit are much better with a long credit history, plus it’s harder to keep your credit card balance at less than 30% if your combined credit card limit is reduced.
  • Consolidate your debt. Consider grouping all of your balances into one amount that’s easy to keep track of (credit cards with a 0% introductory APR period are perfect for this maneuver).
  • Hire a credit repair company. This isn’t something that everyone can afford, but if you’re able to set aside a few dollars for credit repair services, you might be surprised at how effective they can be at boosting your credit score. Just make sure that you pick a trustworthy company.

Overcoming Bad Credit

There’s no such thing as bad credit loans with guaranteed approval. So, what do you do when you’ve been turned down by several lenders and you have no time to improve your credit score? Well, have no fear, there are a few things you can do:

Ask for an interview. Sometimes bank representatives or credit union loan officers are willing to hear you out in person. This helps them put a face to the application. Remember that you’re not there to beg but to convince them that you’re creditworthy.

Prepare documents. Our second suggestion is closely related to our abovementioned one. To get lenders to consider you for one of their loans for bad credit, you need proof that you’re a better candidate than one might think based on your credit score.

Produce documents that show the lender you have a steady income or that you own a home and a car that can serve as collateral. It’s also helpful if you have any savings or other resources that you can use to pay back your loan. Stability is another important factor, which is why it’s good to present official records that show you don’t move around a lot and that you’re capable of keeping the same job for several years. You never know what might tip the scales in your favor.

Find a co-signer. Getting a loan with bad credit can be far less difficult with a co-signer. You can ask a relative or a friend to take on this responsibility, and if their credit score is high enough, you could even qualify for a loan with a relatively low APR and a reasonable repayment term.

Before you start creating lists of possible candidates, bear in mind that your co-signer isn’t just lending you their good reputation but is obligated to pay off your debt if you’re unable to do so yourself.

Loan Options for Bad Credit

Loans for people with bad credit are personal loans – loans with shorter terms, which can be used for anything from home renovations to medical emergencies and debt repayments. These loans can be both unsecured and secured.

An unsecured personal loan isn’t backed by any collateral, while a secured one is. As such, it’s usually easier to get a secured loan because the lender can seize the asset you use as collateral in case you fail to cover your debt. An added bonus is that secured personal loans also come with lower interest rates. These obvious advantages make them the best bad credit personal loans you can find.

Another easy-to-access solution is a payday loan, a small loan with an extremely short repayment period. However, although these quick loans may seem tempting, you should try to avoid them at all costs, seeing as they charge extremely high interest rates.

Where to Get a Loan?

Instead of traditional banks, which are often hesitant to give out loans to people that have bad credit scores, you can turn to online-only lenders. Online loans for bad credit are approved quickly, and most of these lenders don’t charge an origination fee or penalize you for paying back your loan early.

Peer-to-peer platforms offer a similar option. The only difference is that you won’t be receiving your funds from an institution but from an individual or a group of people. All you have to do is post a loan listing and wait for an investor to pick you.

Credit unions should be on your radar as well. These are financial cooperatives that provide their members with traditional banking services. For the most part, they aren't hard to join, and they provide competitive interest rates. The best part is that some are willing to give out poor credit loans to those that seem serious about paying them back despite their short credit history or poor financial decisions in the past.

As a last resort, you could ask your family or friends to help you out. After all, they’re sure to give you the best loan rates, and you can probably expect guaranteed loan approval. That being said, we don’t recommend this step. Borrowing money from people that are close to you can lead to the unraveling of relationships, so make sure you weigh the pros and cons before choosing this option.

Frequently Asked Questions

Which loan company is best for bad credit?


Upstart offers some of the best personal loans for bad credit. Its APRs range from 8.27% to 35.99%, and you can choose between three or five years to pay off your debt. There’s no prepayment fee, and Upstart’s soft credit check won’t impact your credit score. You might also like to know that this online lending marketplace accepts applications from borrowers with no credit score.

Can you get a personal loan with a credit score of 550?


It’s possible to take out a personal loan with a score of 550, but it’s not easy, meaning that you’ll probably have to apply several times with different lenders. Know that a bad credit personal loan will have a high APR and will most likely be small. So, before you start sending in those applications, try increasing your credit score.

What is the easiest loan to get approved for?


A secured personal loan is among the easiest ones to get as it reduces the risk for your lender. They can use the collateral you provide to reduce their losses in the event that you default on your loan. Another highly accessible option is a bad credit payday loan, but its steep interest rates and very short repayment terms often cause more harm than good.

How can you borrow money if you have bad credit?


Online-only lending companies, credit unions, and peer-to-peer platforms will usually accept applications from borrowers with bad credit scores. To improve your odds of qualifying for a loan, you can ask someone to be your co-signer. If you don’t wish to do that, you can prepare any documents you have that prove your creditworthiness and request an in-person interview with a bank representative to try and persuade them to take you on as a client. Read our Guide on how to get a loan with bad credit for more details.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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