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Getting loans with bad credit

How To Get a Loan With Bad Credit

Updated on December 8, 2022


Are you nervous about applying for a loan because of poor credit?

Obtaining a loan can be very difficult if you have a bad credit score. Most lenders are going to view you as a high-risk customer who might default.

And even if you do qualify for a loan from a big bank, most institutions will slap you with an insanely high premium interest rate (we're talking upwards of 20 percent) that will be nearly impossible to pay off. 

So what are you supposed to do if you can't obtain a loan the traditional way?

Don't worry, your credit won't haunt you forever. There are ways to receive loans for poor credit.

Read this article to discover what you need to do to get approved.

Understand Your Credit Score

Before applying for any loan, you first need to obtain your credit score.

Doing so will help you gain insight into what a lender is looking for when they review you for a loan.

Luckily, you can view your credit score for free once a year.

To give you an idea of where you land, the average credit score in the U.S. is 695. If you fall anywhere below this, you should definitely expect some higher interest rates.

Fall way below this, and you may want to look into building your credit up before applying for a loan.

Home Equity Line of Credit

Low interest, tax-deductible lines of credit are available for those who have enough equity in their property.

These loans can be spent any way you wish. However, keep in mind that tapping into home equity puts your property at risk if you are unable to pay off the debt.

This is usually one of the best options for those who have a stable income and can remain disciplined about paying down an equity line.

Apply to Credit Unions

A second option if you are looking into loans for poor credit is to apply to a local credit union.

Not to be confused with banks, credit unions are non-profit organizations. They are member-owned institutions in which you can save and borrow from at a reasonable rate.

Make sure to speak with several unions before signing, as you obviously want to go with the one that offers the lowest interest rate.

Online Direct Lenders

If you are looking to receive your loan in an extremely quick manner, online direct lenders are worth looking into.

Many online direct lenders offer a variety of loan options so you can pick one that suits your needs. Options available include small personal installment loans where you use your job as collateral or title loans where you use your vehicle title as collateral. 

Make sure you select an online direct lender with excellent reviews so you know you aren't running into a scam!


Peer to Peer Loan

Peer to peer loans first came on the scene in 2005, and since then, they've been growing in popularity as an easy way to get loans for poor credit.

This is another online platform. However, instead of receiving a loan from an institution, you'll be receiving one from an individual.

Many people enjoy this option because it is a win-win for both borrowers and lenders. Borrowers pay low-interest rates while lenders earn high ones.

All you have to do is post a loan listing specifying the amount you want and why you want it. Investors then review these listings and then select the ones that meet their criteria.

Your credit score will certainly still be a factor here, but individuals tend to be a little bit more lenient than banks.

Family or Friends

If the age-old advice of not doing business with family or friends is burnt into your brain, you may cringe at the thought of this next option.

However, a loan from a family member or friend is certainly worth considering as long as you know you can pay it back.

If you do choose this route, treat the loan just like any other. Make sure everything is clearly documented and legally recorded.

Draft up a written agreement right at the start that includes payment terms, interest rates, and collateral should you not be able to pay off the loan.

You definitely don't want to risk losing a relationship with a loved one, so this should really be a last ditch option.


If you have a family member or friend who wants to help you out but thinks the idea of being your lender sounds too messy, consider asking them to be your co-signer instead. 

Whoever you ask will need to have a good credit score themselves, so make sure to look into that before applying.

However, should you not repay the loan, full payment responsibility will then fall in the lap of the co-signer. Make sure they understand this before you get them to sign on.

Narrow It Down Before Applying

Now, before you go out and try every option on this list, narrow your choices down, and only do one application at a time.


Every time you send in a loan application, it triggers an inquiry into your credit. Too many inquiries and your credit score will take a hit.

So do your research first and only apply to ones you feel confident about.

Loans For Poor Credit: Bottom Line

Getting loans for poor credit can be tricky business.

However, people receive loans with poor credit all the time. So don't be discouraged if you get rejected from your bank. Just pick one of these options, do your research, and apply when you feel confident.

Keep in mind, however, that you should only ever apply for a loan if you truly need it. Thoroughly consider whether the loan you are applying for is an absolute necessity.

If it isn't, it's best to focus your efforts on building your credit score and paying off your debt first before making any big purchases.

Got any questions about obtaining personal loans with poor credit? Drop a comment below or contact us today!