Contact us whenever you need it!

+1 855 997 0206

Contact hours: Mon-Fri 8am - 5pm ET

A bad credit score can make it difficult for prospective borrowers to get approved for a loan at a favorable rate. Traditional banks see applicants with bad credit scores as high risk and are unlikely to approve bad credit loans. Often, bad credit loans must be attained through alternate channels like credit unions or peer-to-peer lending websites.

Getting approved for a bad credit loan means extra work for the applicant. You will need to carefully weigh your options before proceeding with a bad credit loan application agreement to avoid predatory or illegitimate lenders. You will also need to carefully evaluate your budget to avoid taking out a loan you won’t be able to repay.

While bad credit loans can be a suitable short-term fix for individuals in debt, they typically come with higher interest rates and shorter loan repayment periods. If you’re not careful, a bad credit loan could put you even further in debt.

Getting a loan with bad credit is difficult, but not impossible. When handled correctly, a bad credit loan can help individuals with low credit scores get financially reestablished and improve their credit score over time. By following some essential steps, you can work towards getting the bad credit loan you desire.

What is a Bad Credit Score?

Good and bad credit scores vary from lender to lender. The most popular model used to rate credit scores is the FICO scoring system, which ranges from 300 to 850 as follows:

  • 800-850 – Excellent
  • 740-799 – Very good
  • 670-739 – Fair
  • 580-669 – Poor
  • 300-579 – Extremely poor

FICO calculates credit scores by looking at five key elements:

  • Payment history: 35%
  • Amount owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%

Falling short in one of these areas can cause your credit score to drop drastically. For example, a history of late payments will likely land you in a fair or poor credit score position.

Useful information:

  • A bad credit score can range anywhere from 300 to 600 depending on the lender
  • Bad credit scores can lead to higher interest rates and lower repayment periods on loans
  • Bad credit loans are typically obtained through alternate means, such as a credit union
  • A secured loan is the best option for receiving a loan with bad credit

How Does a Bad Credit Affect a Personal Loan Application?

A credit score in the poor to the fair range means higher interest rates and lower loan limits for the applicant. Many lenders may outright refuse to extend loan services to applicants with a credit score below 580 due to the perceived risk they pose.

While you can still be approved for a loan with bad credit, keep in mind that you may end up paying significantly more interest than you would with a higher credit score. If you don’t need the loan urgently, you may want to take the time to improve your credit score before applying.

How Your Credit Score Affects a 15-year $100,000 Mortgage Loan

Score Interest Rate Monthly Payment Total Interest Paid
760-850 2.705% $676 $21,680
700-759 2.927% $687 $23,660
680-699 3.104% $696 $25,280
660-679 3.318% $706 $27,080
640-659 3.748% $727 $30,860
620-639 4.294% $755 $35,900


7 Steps to Get a Loan with Bad Credit

Getting a loan with bad credit requires some extra work on behalf of the borrower. The following steps can help you get approved for a bad credit loan:

  1. Check your credit score. Before you begin the loan application process, check your credit score through a website or your credit card provider to get an idea of how you might qualify.
  2. Improve your score. If your credit score is too low to qualify for a suitable loan, or you do not need an emergency loan, take some time to improve your credit score before submitting your application.
  3. Assess your budget. Before looking into different lenders, determine what you can afford. The last thing you want to do is take out a loan too big for you to repay.
  4. Look into secured loans: Secured loans are backed by an asset like a car or home. Secured loans are often easier to get, as they lower the risk to the lender.
  5. Prequalify with multiple lenders. Some lenders allow you to check whether you would qualify without a hard credit check using a prequalification process.
  6. Add a co-signer. A co-signer is a third-party guarantor who agrees to pay back the loan if you are unable to. Adding a co-signer can help you receive better loan terms, as it lowers the risk you pose to the lender.
  7. Submit your application. Once you’ve decided on a lender, you’re ready to submit your application. Be prepared to provide personal information such as your social security number, address, and income amount.

Where to Get a Loan with Bad Credit

If you need a loan and don’t have time to improve your credit score before taking out a loan, you can opt for one of the following methods:

Type of Loan Characteristics
Credit Union Lower interest rate ceiling compared to traditional banks

Willing to look past low credit score

Easier to obtain loans than with a traditional bank

Family/Friends Low to no interest rate

Avoid applications and qualifying processes

Suitable for an emergency loan

Peer-to-peer lending websites Utilizes an online platform rather than an institution

Customizable interest rates

More readily available for people with bad credit


Pros and Cons of a Bad Credit Loan

Bad credit loans may not be the right choice for everyone. It’s crucial to weigh the pros and cons of a bad credit loan before proceeding with any applications.

Pros

  • Bad credit loans are fast: Most online applications for bad credit loans receive a response within a few hours.
  • Lower interest than on credit cards: Bad credit loans typically offer lower interest than you would pay on credit card debt.
  • More lender options: Peer-to-peer lending businesses are increasing. If you are patient, you may even be able to make lenders compete for your business.
  • Repayment term length: Repayment terms for bad credit loans typically range from 1-5 years.
  • Improved credit score: If you make your loan repayments on time, your credit score will improve, making you a more desirable loan applicant in the future.

Cons

  • Higher interest rates than good credit loans: The lender is taking a risk on you, so they’ll need to offset it with higher interest rates.
  • Fees and penalties: Some bad credit loans come with additional fees or penalties. Be sure to read the fine print of the agreement for any hidden surcharges.
  • Collateral requirements: Some loans may require you to establish a lien giving the lender access to your vehicle or home if you fail to make payments.
  • Licensing issues: Online lenders may not be licensed in your state. Be sure to choose a lender certified in your state before proceeding.
  • May end up increasing debt: Make sure you can repay the loan before applying. Predatory lenders are all too willing to approve a loan they know you can’t repay.

Getting the Most Out of Your Bad Credit Loan

A bad credit score may make your application process more difficult, but it does not preclude you from receiving a loan. Choose a secured loan within your budget to better your chances of getting a bad credit loan. A secured loan can ensure you won’t end up in further debt or worsen your credit score.

Be sure to research multiple lenders before settling on one. What’s right for another borrower may not be suitable for your situation. Make sure to read the fine print of your loan policy for any hidden charges.

To ensure you get the loan you desire, create your own contract at home or online. With LawDistrict.com’s loan agreement template, you can create a tailored loan agreement that meets your individual needs.

FAQs About Bad Credit

Bad credit scores don’t have to spell disaster. Use the following pieces of useful information to help you bring your credit score up and obtain a desirable loan.

  • How can I improve my credit score?

    If you don’t require an emergency loan, improving your credit score is the best way to get approved for a loan. You can do so by limiting credit card use and making payments on time.

  • What is the difference between secured vs. unsecured loans?

    A secured loan requires collateral. The loan is secured against your assets, allowing for a higher borrowing amount and lower interest rates.

    Unsecured loans do not require collateral. Although they are harder to obtain, they are generally approved faster. If you have a low credit score, you may have more difficulty obtaining an unsecured loan.

  • How do I prove creditworthiness?

    Your creditworthiness lets lenders know whether you are a suitable candidate for a loan. A few things you can use to prove your creditworthiness include:

    • Tax return forms from at least the last two years
    • Job history information, including salary and pay stubs
    • List of assets such as homes, cars, and property
    • List of unsecured debts such as credit cards, student loans, and medical bills
    • Whether you pay or receive alimony or child support
    • Bank statements for checking, savings, and CDs

A bad credit score can make it difficult for prospective borrowers to get approved for a loan at a favorable rate. Traditional banks see applicants with bad credit scores as high risk and are unlikely to approve bad credit loans. Often, bad credit loans must be attained through alternate channels like credit unions or peer-to-peer lending websites.

Getting approved for a bad credit loan means extra work for the applicant. You will need to carefully weigh your options before proceeding with a bad credit loan application agreement to avoid predatory or illegitimate lenders. You will also need to carefully evaluate your budget to avoid taking out a loan you won’t be able to repay.

While bad credit loans can be a suitable short-term fix for individuals in debt, they typically come with higher interest rates and shorter loan repayment periods. If you’re not careful, a bad credit loan could put you even further in debt.

Getting a loan with bad credit is difficult, but not impossible. When handled correctly, a bad credit loan can help individuals with low credit scores get financially reestablished and improve their credit score over time. By following some essential steps, you can work towards getting the bad credit loan you desire.

What is a Bad Credit Score?

Good and bad credit scores vary from lender to lender. The most popular model used to rate credit scores is the FICO scoring system, which ranges from 300 to 850 as follows:

  • 800-850 – Excellent
  • 740-799 – Very good
  • 670-739 – Fair
  • 580-669 – Poor
  • 300-579 – Extremely poor

FICO calculates credit scores by looking at five key elements:

  • Payment history: 35%
  • Amount owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%

Falling short in one of these areas can cause your credit score to drop drastically. For example, a history of late payments will likely land you in a fair or poor credit score position.

Useful information:

  • A bad credit score can range anywhere from 300 to 600 depending on the lender
  • Bad credit scores can lead to higher interest rates and lower repayment periods on loans
  • Bad credit loans are typically obtained through alternate means, such as a credit union
  • A secured loan is the best option for receiving a loan with bad credit

How Does a Bad Credit Affect a Personal Loan Application?

A credit score in the poor to the fair range means higher interest rates and lower loan limits for the applicant. Many lenders may outright refuse to extend loan services to applicants with a credit score below 580 due to the perceived risk they pose.

While you can still be approved for a loan with bad credit, keep in mind that you may end up paying significantly more interest than you would with a higher credit score. If you don’t need the loan urgently, you may want to take the time to improve your credit score before applying.

How Your Credit Score Affects a 15-year $100,000 Mortgage Loan

Score Interest Rate Monthly Payment Total Interest Paid
760-850 2.705% $676 $21,680
700-759 2.927% $687 $23,660
680-699 3.104% $696 $25,280
660-679 3.318% $706 $27,080
640-659 3.748% $727 $30,860
620-639 4.294% $755 $35,900


7 Steps to Get a Loan with Bad Credit

Getting a loan with bad credit requires some extra work on behalf of the borrower. The following steps can help you get approved for a bad credit loan:

  1. Check your credit score. Before you begin the loan application process, check your credit score through a website or your credit card provider to get an idea of how you might qualify.
  2. Improve your score. If your credit score is too low to qualify for a suitable loan, or you do not need an emergency loan, take some time to improve your credit score before submitting your application.
  3. Assess your budget. Before looking into different lenders, determine what you can afford. The last thing you want to do is take out a loan too big for you to repay.
  4. Look into secured loans: Secured loans are backed by an asset like a car or home. Secured loans are often easier to get, as they lower the risk to the lender.
  5. Prequalify with multiple lenders. Some lenders allow you to check whether you would qualify without a hard credit check using a prequalification process.
  6. Add a co-signer. A co-signer is a third-party guarantor who agrees to pay back the loan if you are unable to. Adding a co-signer can help you receive better loan terms, as it lowers the risk you pose to the lender.
  7. Submit your application. Once you’ve decided on a lender, you’re ready to submit your application. Be prepared to provide personal information such as your social security number, address, and income amount.

Where to Get a Loan with Bad Credit

If you need a loan and don’t have time to improve your credit score before taking out a loan, you can opt for one of the following methods:

Type of Loan Characteristics
Credit Union Lower interest rate ceiling compared to traditional banks

Willing to look past low credit score

Easier to obtain loans than with a traditional bank

Family/Friends Low to no interest rate

Avoid applications and qualifying processes

Suitable for an emergency loan

Peer-to-peer lending websites Utilizes an online platform rather than an institution

Customizable interest rates

More readily available for people with bad credit


Pros and Cons of a Bad Credit Loan

Bad credit loans may not be the right choice for everyone. It’s crucial to weigh the pros and cons of a bad credit loan before proceeding with any applications.

Pros

  • Bad credit loans are fast: Most online applications for bad credit loans receive a response within a few hours.
  • Lower interest than on credit cards: Bad credit loans typically offer lower interest than you would pay on credit card debt.
  • More lender options: Peer-to-peer lending businesses are increasing. If you are patient, you may even be able to make lenders compete for your business.
  • Repayment term length: Repayment terms for bad credit loans typically range from 1-5 years.
  • Improved credit score: If you make your loan repayments on time, your credit score will improve, making you a more desirable loan applicant in the future.

Cons

  • Higher interest rates than good credit loans: The lender is taking a risk on you, so they’ll need to offset it with higher interest rates.
  • Fees and penalties: Some bad credit loans come with additional fees or penalties. Be sure to read the fine print of the agreement for any hidden surcharges.
  • Collateral requirements: Some loans may require you to establish a lien giving the lender access to your vehicle or home if you fail to make payments.
  • Licensing issues: Online lenders may not be licensed in your state. Be sure to choose a lender certified in your state before proceeding.
  • May end up increasing debt: Make sure you can repay the loan before applying. Predatory lenders are all too willing to approve a loan they know you can’t repay.

Getting the Most Out of Your Bad Credit Loan

A bad credit score may make your application process more difficult, but it does not preclude you from receiving a loan. Choose a secured loan within your budget to better your chances of getting a bad credit loan. A secured loan can ensure you won’t end up in further debt or worsen your credit score.

Be sure to research multiple lenders before settling on one. What’s right for another borrower may not be suitable for your situation. Make sure to read the fine print of your loan policy for any hidden charges.

To ensure you get the loan you desire, create your own contract at home or online. With LawDistrict.com’s loan agreement template, you can create a tailored loan agreement that meets your individual needs.

FAQs About Bad Credit

Bad credit scores don’t have to spell disaster. Use the following pieces of useful information to help you bring your credit score up and obtain a desirable loan.

  • How can I improve my credit score?

    If you don’t require an emergency loan, improving your credit score is the best way to get approved for a loan. You can do so by limiting credit card use and making payments on time.

  • What is the difference between secured vs. unsecured loans?

    A secured loan requires collateral. The loan is secured against your assets, allowing for a higher borrowing amount and lower interest rates.

    Unsecured loans do not require collateral. Although they are harder to obtain, they are generally approved faster. If you have a low credit score, you may have more difficulty obtaining an unsecured loan.

  • How do I prove creditworthiness?

    Your creditworthiness lets lenders know whether you are a suitable candidate for a loan. A few things you can use to prove your creditworthiness include:

    • Tax return forms from at least the last two years
    • Job history information, including salary and pay stubs
    • List of assets such as homes, cars, and property
    • List of unsecured debts such as credit cards, student loans, and medical bills
    • Whether you pay or receive alimony or child support
    • Bank statements for checking, savings, and CDs