How to get a personal loan with bad credit

How to get a personal loan with bad credit

If you are in need of a personal loan but have a bad credit rating, it may seem an impossible goal. Here are some steps you can follow to achieve an approved personal loan with bad credit.

Before you research how to apply for a personal loan online, you should equip yourself with the knowledge of your credit score. Knowing your credit score before going to the bank will allow you to prepare an explanation as to why this is the case, and give a plan to rectify it.

A bank will consider an applicant that shows willing to rectify their bad credit problems, as they could be seen as less of a risk than those who are not prepared to do so. Once you know your credit score, you can begin the application process to your chosen bank or financial institution.

Offer up security

One way to get a loan with bad credit is to offer up security in the form of a house, car or another asset. This will then be a secured loan, which is a popular choice for banks who see those with bad credit as high-risk clients.

A secured loan may even allow you lower interest rates, as you will not be seen as a high-risk client despite having bad credit. However, it is important to remember that the asset you offer will be claimed by the bank should you fall behind on repayments of your loan. Applying for an unsecured loan with bad credit is a much more difficult process, and banks may not look kindly on this application.

Visit a debt counsellor

Visiting a debt counsellor may seem like a drastic step to take but it can have positive results. Debt counsellors work with you to work out a better monthly budget which will allow you to repay your debts efficiently and easily.

When utilising the services of a debt counsellor, you will undergo a debt review, which is the process of being assessed and assisted by the counsellor. These professionals will deal with your creditors and come to an agreement with them which enables you to cover your living expenses and pay a portion of the remaining funds to cover your debts. Visiting a debt counsellor will also reflect positively to the bank you are applying to for a personal loan.

Look for a cosigner

A cosigner is someone who will take on the responsibility of repaying your debt if you are unable to. It is a responsibility that is not entered into lightly, so be sure that your cosigner is someone who you trust and who trusts you, and who is willing to take on such a commitment.

Banks may look to the fact that a person deems you trustworthy as a positive sign, making loan approval more likely. Be sure, however, that your cosigner is able to make repayments should they need to and is not an unreliable person. There could be serious consequences for having a cosigner who is also unable to make repayments if you should fail.

Try a peer-to-peer loan

A peer-to-peer loan (P2P) is a loan between a borrower and an individual, rather than a bank or financial institution. It is not a loan between friends but rather is a loan which is handled by a financial company. These companies connect consumers who need an unsecured loan with an individual who has the extra money to spare.

The individual or investor is usually not another company but is a normal person who has extra money they wish to invest in a way which helps another person. However, it is important to remember that his goodwill does not go unpaid. You will still have to make monthly repayments to the investor and you should expect slightly higher interest rates.

What to avoid if you have bad credit

When looking for a personal loan solution with bad credit, there are many quick and easy solutions to be found, but these should be avoided if you do not want to pay exorbitant interest rates or be pulled into a scam.

  • No-credit-check loans: Some lenders may offer no-credit-check loan options for those with bad credit, which sounds like a great option if your credit history is less than desirable. However, these loans often have extremely high interest rates, almost up to 200%.
  • Payday loans: Payday loans are easier to acquire than normal loans but come with significant risk and expense. While they are usually for small amounts, the repayments are due in a short time period of two weeks, making these loans difficult to repay.


Personal loans with bad credit are not impossible, but without the right preparation and information can be difficult to obtain. You should explore every option before settling on your final decision, as some banks or lenders may offer better interest rates than others. If you are prepared to rectify your bad credit, you are taking the first step to securing a personal loan.


Photo by Got Credit

Authored by: Pete Anderson

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