Can You Get a Personal Loan with Bad Credit? Proceed with Caution.

The short answer to this question is yes, you can get a personal loan with bad credit! Do not let anyone tell you otherwise. However, you may need to follow an alternative path to the money that you need. Here is what you need to look out for.

Getting a Personal Loan with Bad Credit

If you are personal loan shopping, lenders will consider you a higher risk. The way that lenders account for a high risk borrower is to charge a higher interest rate on the loan. You may be able to negotiate a slightly lower rate if you have a history at a particular financial institution, but the market rates are set for the most part. A person with a credit score of 550 will pay a higher rate than someone with a 750 credit score. There are certainly pros and cons for taking out a loan with poor credit and you should take note.


  • Access to agreed terms
  • Get a defined amount fast
  • One payment when consolidating debit


  • Higher interest rates and fees
  • Shorter repayment schedule
  • A limited to the loan amounts

Small businesses without a history of reported revenue may also be required to pay a higher interest rate if the proprietor has a low personal credit score.

Know You’ll Likely Have to Shop Around

Although the market rate for interest rates has a general range for a particular credit score range, each financial institution has individual discretion when determining the final rate. You may be able to get a lower rate by shopping around. Despite your lower credit score, lending is still a competitive business. If you are looking to shop personal loans then lenders can compete for your business. They may offer you better terms in order to earn your business.

You have more opportunity to loan shop around than ever thanks to the Internet. Using online resources, you can compare loan rates for banks and financial institutions that are not in your local area with those that are. The government also has public resources set aside specifically to help people find loans. Loanry is one of the resources you can use as well.

Assets and Cosigners Help

If you are willing to submit to a secured loan, you may be able to secure a lower rate. A secured loan is a loan that is protected by a large asset such as a house or a car. If the borrower defaults on the loan, the creditor has the right to repossess the asset that is securing the loan. Asking for cosigner take that same amount of organization and politeness as asking friends and family for money does.

A second mortgage is a form of secured loan. Some specialty banks (not pawn shops) will take luxury items such as boats, artwork or jewelry as collateral for a secured loan. However, the borrower will usually need to have a history of business with the bank before an illiquid asset can be used as a loan security, even for a borrower with relatively good credit.

Having a cosigner may also help to reduce your interest rate on a loan, even if you want to get a personal loan with bad credit. A cosigner is another person who is willing to take on legal responsibility for the loan if you default on the payments. The lender will be able to lobby your cosigner for payments under the terms of the agreement. This means that a default on your part can negatively affect the credit of your cosigner.

In some business loans, the proprietor of the business may be required to act as the cosigner for the loan. The bank may have access to repossess or liquidate the personal assets of the borrower if the business defaults on the loan.

Get Yourself on the Road to Clean Credit

You cannot clean up your credit overnight. The process involves a lifestyle change – improving your financial habits across the board. You must study what caused your credit problems in the first place and make active changes towards a healthier way of spending money, living with your means and managing your cash flow. You will also need to learn the process of contesting errors on your credit record with the major bureaus, which may take a while as well. However, cleaning your credit is doable with the right attitude, willingness to change and the appropriate professional help.


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