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Can You Get a Personal Loan with Bad Credit?

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Bad credit is unfortunate but it is not a credit death sentence, so to speak. In fact, many people with less-than-perfect credit have used the loan process to rebuild their credit and bring their credit score back up. Usually, if you have a bad credit score or a poor payment history, you still can access personal loan resources, but you will most likely qualify for a higher interest rate (meaning you will pay more money to the bank each month during the repayment process) and may also have to pay more in fees and charges. However, in most cases the investment is worth it, as getting a personal loan and making timely payments can have you right back in the credit game. Here’s a look at the nature of bad credit and what loan options may be available to those with credit issues.

What Is Bad Credit?

Most credit companies use a numeric system to assign a credit score based on timely or untimely (late) payments for bills like car payments, credit cards, mortgage payments, and others. Other things can affect your credit score as well, like having too many credit cards or only making the minimum payment. Most companies use the FICO or VantageScore credit score, which ranges between 300 and 850. Bad credit is that which falls at or below 600, while a credit score of 601 or higher is average. 661-780 is considered good credit, while 781 or above is rated as excellent credit.

Loan Options if You Have Bad Credit

Here are some great options for securing a personal loan with bad credit.

  • Go through a credit union. Credit unions are similar to banks but different in that they are owned by their members, not a corporation or profit-seeking shareholders. This means that a person with bad credit can often “get a fair shake” with regard to a personal loan. Credit unions offer people with average and less-than-average credit the opportunity to rebuild their credit through loan approval. Credit unions offer loans based on terms that are fair in terms of dollar amount and interest, making them quite affordable.
  • Get a cosigner. Using a co-signer to secure a personal loan is a great way to get yourself back in the credit game. The process is simple: simply confer with a close friend or relative with a favorable credit rating and apply for the personal loan together. The banks love the idea of an extra person on the loan, and the credit “push” afforded by your friend or family member makes the loan approval virtually guaranteed. Better still, the loan payments and interest rate will be based on the cosigner’s credit score, not your own, making the loan terms more favorable and affordable.
  • Check out peer-to-peer loans: A peer-to-peer loan often takes longer to secure than other loan types, but once funded by investors usually goes through in two weeks or less. A peer-to-peer loan can really help you build your credit back up. Peer-to-peer loans may have fees and often include an origination fee, but are an excellent tool for rebuilding credit.
  • Explore secured loan options: Secured personal loans work for borrowers of all types so long as they have an asset such as a car or piece of property to pledge as collateral. Secured loans work on the premise of secured collateral: in other words, your collateral becomes secured debt owed to the bank or lender in the event you don’t make payments.

Just because you have bad credit now doesn’t mean that you can’t fix it. In fact, millions of people turn to personal loans to secure much-needed funds and rebuild their credit. As long as timely payments are made, anyone get their credit score back to a comfortable level again.


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