How to Get a Personal Loan If You Have a Bad Credit Score

a poor credit score report of 205

Your credit score plays an important role in your financial life, including whether or not you can get approved for certain types of loans or other credit accounts. The average credit score in America is getting higher over time as people learn more about how much it matters and how to take care of their credit histories.

One way to build your credit is to get a loan and pay it back on time and as agreed. But how can you get a personal loan if you have a bad credit score to begin with? Find out more below.

What Is a Personal Loan?

a person reviews personal loan agreement contract

Personal loans are loans you can use according to your own needs. You can find personal loan options for almost any legal purpose, including covering an unexpected expense, making a large purchase and consolidating other debts. Some types of personal loans include:

  • Secured loans, which are secured by property such as a car, a boat, jewelry or art.
  • Unsecured loans, which are also called signatory loans because only your signature on the agreement secures them.
  • Payday loans, which are small loans typically paid back on your next pay day.
  • Debt consolidation loans, which are used to pay off existing debt.
  • Short-term loans, which you pay back within a few months or years.

What Is Bad Credit?

a person looks at their poor credit score on a computer screen

A good credit score is typically considered a score that’s more than 660 or 670, depending on which scoring model is being used.

In the FICO scoring models, anything under 660 is considered fair or poor. Credit scores from 300 to 579 are poor.

In Vantage scoring models, anything under 661 is considered fair, poor or very poor. Scores ranging from 300 to 499 are very poor while scores ranging from 500 to 600 are poor.

If your score falls into poor or very poor ranges, you’re considered to have bad credit. In some cases, even “fair” credit may be considered bad for the purposes of getting loans.

Ways to Get a Personal Loan with Bad Credit

a couple signs a loan application

While bad credit can make it more challenging to get approved for loans, it doesn’t make it impossible. Here are some ways you can get approved for a personal loan if you have a bad credit score.

1. Get a Cosigner

a loan with cosigner application form

Technically, one of the easiest ways to get a loan if you have bad credit is to get someone to cosign on the loan. A cosigner is someone who has good enough credit to get the loan. They agree to be responsible for the payments on the loan if you don’t make payments as agreed.

However, there are some challenges with this tactic. You have to know someone with decent credit who will agree to cosign for you. Many people are hesitant to cosign on a loan because it leaves them at risk financially.

It can also put their good credit at risk. Most lenders report payments on the loan to both the primary borrower and the cosigner. If you miss a payment, that shows up on the cosigner’s credit report too and can potentially bring down their score.

2. Use a Credit Building Loan

a person signs contract with an agent

Credit building loans are designed to help people with low or no credit scores build credit for the future. You typically don’t need a good credit score to get these types of loans, and some don’t even have credit check requirements.

However, these are specialty financial products used to build your credit. They’re a loan that provides you money you can use for an unexpected expense or necessary purchase. That’s because credit building loans work as follows:

  • You secure the loan by a deposit equal to the loan amount.
  • That money is held in a certified, locked savings account.
  • You make agreed-upon payments on the loan, typically biweekly or monthly, for a few months or a year.
  • Once you make all payments, the savings account is unlocked and you get your money back.
  • If you fail to make the payments, the money from the savings account is used to ensure the lender receives their money.

As you can see, though credit building loans are a good financial tool for specific uses, they aren’t a good way to get money you need in your pocket today. You actually need to have the money yourself before you get the loan.

3. Apply for a Secured Loan

a wooden security lock sits on top of coins to represent a secured loan

Secured loans can be easier to get than unsecured loans in some cases. That’s because they’re somewhat less risky for the lender.

To get a secured loan, you need something you can put up as collateral. One common method is a title loan. If you own a car, truck, boat or even an ATV outright, you may be able to put the title up as collateral for a personal loan. If you don’t pay back the loan, the lender can repossess the item you used as security.

Some lenders allow you to use other valuables as collateral, including jewelry, electronics or pieces of fine art.

The downside of these types of loans is that you need something of value. You also need to find a lender that provides this type of highly specialized loan. Finally, you need to read the fine print to ensure you won’t be giving up your property if you make a single late payment or have some other small problem with the loan.

4. Apply for a Loan That Doesn’t Require a Good Credit History

couple-shakes-hands-with-loan-officer.png" alt="a couple shakes hands with a loan officer

Don’t have any of the above? Not to worry. There are personal loan options that don’t require a good credit history.

In fact, loans from Wise Loan don’t require a great credit history. They also only take a few minutes to apply for, and if you’re approved, you can get your funds as early as same day or next day. Wise Loan also reports to two of the three credit bureaus to help you build your credit for the future, making it more possible that worrying about getting a loan with bad credit may be a temporary concern for you.

Ready to check out your options? Apply today.





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