How to Get a Bad-Credit Personal Loan

A credit union may be more willing to consider more than just your credit score.
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Bad credit can leave you feeling as if you have few borrowing options just when you need them the most. However, being a high-risk borrower does not necessarily mean that bad credit and payday loans are the only choices you have for getting a personal loan. Although a low credit score, which according to is any score below about 620, will equate to a higher interest rate, you have the option of qualifying with a traditional lender for a personal loan.

Choose the Right Lender

Qualifying scores and credit requirements vary among lenders and financial institutions. The trick is to find one that considers your character in addition to your credit score. According to, a credit union is a good place to start. Unlike a for-profit commercial bank, a credit union is a nonprofit organization owned by its members. Not only do most credit unions actively seek new borrowers, but if you find one you have something in common with, such as an affiliation with your employer or your profession, you can improve your chances of qualifying for a personal loan.

Do Not Ask for Too Much

Consider what you need the loan for and how much you really need. According to First Financial, an online lender, you can improve your chances of qualifying by asking for the least amount you need. Most applications ask what you plan to do with the proceeds. You might have a better shot at getting a loan for debt consolidation than if you plan to spend it for a vacation.

Apply for a Secured Loan

Leveraging personal assets such as a percentage of the equity in your home or a vehicle might help you qualify for a personal loan and reduce the interest rate. In fact, First Financial says that if you offer good collateral, some lenders may not even consider your credit score. If pledging your home or car makes you uncomfortable or isn't possible, Nolo recommends that you open a certificate of deposit or savings account and offer the account as collateral.

Consider a Peer-to-Peer Personal Loan

Peer-to-peer lending, also known as social lending, is a nontraditional online lending option in which you borrow from an individual rather than a financial institution. Although P2P lenders do charge a percentage of the amount you borrow as a loan origination fee, they report payments to all three major credit-reporting agencies. Also, according to LendingMemo, a P2P informational site, benefits include higher approval rates, lower interest rates, no prepayment penalties and the option to qualify for a larger loan than you would with a traditional bank. Research options at websites such as the Lending Club and Prosper.

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