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How to get a personal loan with a bad credit score

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Wealth can be defined in a number of different ways. Sometimes a personal loan can be a better short-term solution. It can help you pay for medical costs, a vacation or a wedding without damaging your retirement savings or emergency funds. Getting a fair rate depends only on your credit score. Having a bad one can prevent you altogether, or make this solution a costly one.

Let’s start by defining a “bad credit score”. The usual range for this indicator is between 300 and 850, yet anything below 620 is considered too risky. If you are looking for a single-digit interest rate, then you might be interested in getting this number above 700 or more. Being on the lower edge means balancing your risk score by paying more interest. You can expect up to 12% for a mortgage, 20% for car loans and over 36% for credit cards.

After you decide on how much money you need, then you need to sort out your strategy to get that amount. First, start by checking your credit score to estimate what conditions apply to your specific case. Learn how to do this for free by checking this resource:

What are your options?

If you can’t get a traditional personal loan from a bank, there are a few options. We list them below from the less risky to the ones that should be avoided.

Credit Unions

When your credit is less than stellar, you could take advantage of professional support from your peers. If you are lucky enough to be in a line of work which has credit unions you could benefit of this option. These associations tend to have competitive rates and put less emphasis on credit scores, compared to banks.

The maximum amount you can borrow is usually capped at $10,000, but that still gives you enough financing for personal goals or even to start a small business. A comprehensive list of options is available at the National Credit Union Administration if you are not a member of a union already.

Peer-to-Peer (Social) Lending

Just like Credit Unions, this method holds no risk other than getting a higher rate. Depending on the situation and the borrower this could mean anything between 20-35%. Both parties enter this type of contract if they agree to the terms.


If you had a difficult time meeting your payments, but that was just due to a temporary situation like losing your job or a medical condition, you can get more trust from lenders if you bring in a co-signer with a high score. Be sure you explain to this person the risks of accepting such a position. Any delays or missed payment will affect their credit history as well. Use you co-signer as a coach or motivator to remain on track with your payments. They should also have a saying in negotiating the terms of the loan if they want to.

Home Equity

This is a high-risk method to get your hands on the money you want and should only be used as a last resort, for example for healthcare problems. The risk to lose your home is only justified if you are able to get a better rate and you already have excellent budgeting skills and are diligent with making on-time payments.

How to avoid loan sharks?

Be sure you do the math and find out exactly what you are going to pay in total. The first red flag is an advertisement stating the rate per week or day. You should look for the APR of the loan.

If the credit institution is ready to give you the loan right away, without asking for any papers or documents, they are not the ones taking chances, you are. Double check the terms of the contract you are about to sign. Sometimes it’s not about making more money, but minimizing losses.