5 Ways To Get a Loan Even if You Have Bad Credit

BY: ON MONDAY, JULY 30, 2018

While technology has simplified the process of requesting personal and business loans, an undesirable or poor credit score makes the applicant a high-risk customer for the banking and non-banking lenders. Lenders rely on current credit scores to ascertain the viability of granting a loan to the applicant. As such, an applicant with a bad credit score faces rejection 9/10 times. Now, what if the credit score is less than desirable and a loan is required in the immediate future? Let’s explore the possible options.

High-Interest Loans

Various legal and registered financial enterprises exist that are willing to extend short-term cash even with a bad score. Check out the loans for people with bad credit from Finance.co.uk, a finance comparison site that shows the availability of all kinds of financial instruments. Visit each of the companies mentioned in the above link and apply. Do remember that the credit score will still be checked, but the possibility of getting a short-term loan sanctioned is higher than traditional banking institutions. Ensure that these loans are paid on time; otherwise, the credit score will further spiral downward.

Credit Unions

Similar in terms of their services to commercial banks, credit unions are managed by its members, and they are non-profit institutions. Contacting a community-based or employer recommended credit union is another sensible option. With them, the credit score is not the sole deciding factor. They judge based on the applicant’s character, social standing, and commitment.

Co-Signer’s Guarantee

If someone is willing to become a co-signer, it is possible to get a personal loan from traditional sources and with a bad credit score. In this, the lender sets the terms of the loan based on the credit score of the co-signer, and this loan will reflect on the credit report of both the primary applicant and the co-signer. Failure to make timely payments will reflect negatively on the co- signers credit score.

Peer-to-Peer Lending

Even though they have been around since 2005, peer-to-peer lending is quite popular. These are online platforms that match an individual loan seeker to an individual loan provider. Let’s say, the applicant is from the New York City, and the lender is from New Orleans – as long as both agree to the lending and repayment terms mutually, everything is fine. Of course, the credit score matters here too but the rules are often relaxed. The peer-to-peer lending website management verifies the lender’s credentials for the borrower to decide.

Secured Loans

A secured loan or a collateral-based loan is an option if none of the above options work. The applicant can get a loan against an owned asset such as a home, land, car, invested bonds, and stocks. Documents confirming the ownership of the asset by the applicant have to be deposited to the lender as collateral. If the loans are repaid on time, the lender returns the collateral papers. If not, the loaned amount is adjusted against the collateral. A secured loan often has lower interest rate and helps to improve credit score.

While the above were some methods to avail loans with a bad credit score, let’s look at two crucial things you shouldn’t do with a bad credit score.

  • Closing Credit Cards

Often, people with bad credit score make a grave mistake, that is, to close their credit cards. Why? Closing an existing line of credit reduces the overall credit limit and impacts the debt ratio. Credit card limit, usage, and repayments form a major part of the credit score. Willful closure of the card/s gives the message to the lenders and credit bureaus that the cardholder is unreliable. It is better to NOT use the credit card/s than to close it.

  • Filing Debt Closure

Though slightly different from bankruptcy, the essence is the same. Paying less than the total owed amount, aka debt forgiveness, might sound like a great deal but it has its repercussions. First, the creditor/s has to agree and second, the reduced amount of debt will appear as an ‘unpaid obligation’ on the credit report. This is likely to be visible on the credit report for 7 or more years. Opting for this makes the person unreliable in front of the creditors if a loan is again applied for in the future.


Anyone with a bad credit score should try to improve the credit score. However, if any financial requirements arise in the immediate future, the above stated five options can be considered.

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About the Author

Christopher Smith

Christopher is an adventure aficionado and freelance blogger. He loves traveling and writing.

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