How To Get Approved And Borrow Money With Bad Credit

Anyone who has ever wanted to get a loan knows that your credit score is the primary indicator that affects the likelihood of your application being approved. Typically, the lower your credit score, the less likely you will get a loan on favorable terms.

All credit scores below 670 points are considered “bad credit”. If you fall into the category of borrowers with this rating, you may find it challenging to convince a lender that you will pay back your borrowed money on time. But don’t despair; many financial institutions work with this type of borrower so that you can get a bad credit loan.

The most popular types of loans you can get with any credit history are personal, student, or payday loans, credit card cash advances, and all varieties of secured loans.

What Is a Bad Credit Score?

As you know, credit use history is significant to all Americans. You can easily borrow money from a bank at a low interest rate if you have a high credit score.

At the same time, studies by financial experts show that people with bad credit scores (less than 580 FICO points) were delinquent on their loans 61 percent of the time. Your credit score is affected by the following indicators:

  • Whether you pay your bills and loan payments on time.
  • How long have you been using your credit?
  • Whether you have a lot of debt on all your accounts.
  • How much credit you are using?
  • Have you taken out any new loans recently?
  • What types of credit do you use?

Because your credit score combines so much information, lenders are more likely to look at it, not just your income.

What Are Bad Credit Loans?

Bad credit loans are loans for borrowers whose credit score is below 670 points. Some companies in the financial market work only with this category of people, for example, Upgrade, SoFi, LendingClub, etc.

Most often, borrowers with low credit scores can get unsecured or secured personal loans, student or auto loans, and credit card cash advances. Because most of these loans have high interest rates, people use them to cover unexpected expenses or pay large bills (medical or tuition).

You can get a loan from a bank or credit union, but the easiest way to do it would be with an online lender. When choosing a lender, consider factors such as APR, loan terms and amounts, and the availability of any hidden fees.

How to Get a Bad Credit Loan

You should prepare and learn more about the process to get the best credit terms. You can use our plan below if you don’t know where to start.

Check Your Credit Score

A credit score is often the first thing lenders look at before lending to someone. It is a number that summarizes your entire credit history and shows financial institutions whether you are a reliable borrower.

There are several categories of credit scores, from poor to excellent. Borrowers with good credit (from 670 points) have the best chance of being approved, but people with poor credit can also get a bad credit loan, just on less favorable terms.

You need to know your credit score to approach the right lender. For example, banks often only work with borrowers whose score is more than 670 points, while some online lenders are willing to lend money even to those with only 560 FICO points.

You can check your credit score for free in your bank’s app, on particular websites, or in your credit report.

Be Sure You Can Repay

Before you sign a loan agreement, you should ensure you can repay the money you borrowed on time. In addition, it is crucial to understand that the loan is a commitment for several years, so you must have a stable income and employment to avoid problems with repayment.

Remember that every late payment you make on your loan can take away your FICO points, so you won’t be able to borrow money on favorable terms for years to come. In addition, unpaid loans often prevent you from getting a job, renting a place to live, or even getting insurance, so calculate carefully before you sign a contract with a financial institution.

Remember to account for hidden fees and penalties and calculate monthly payments and APR.

Compare Bad Credit Loans

Every percentage of the APR can cost you hundreds of dollars a year, which is why it’s so important to compare all the terms and conditions available to you from different lenders. Refrain from settling for the first offer you receive, even if it looks favorable. Instead, compare each lender’s terms and conditions and choose the one with which you will pay the slightest interest and have the lowest monthly payments.

Get Prequalified

Online lenders often allow you to determine what loan terms will be available. Besides, unlike banks, they conduct soft credit checks that do not harm your FICO score and will enable them to ensure that you are a reliable borrower.

To prequalify for a loan, you usually need to complete the following steps:

  1. Go to the lender’s website and find the “Apply” or “Prequalify” button.
  2. You will then need to enter your personal information, such as your first name, last name, and residential address, and provide a Social Security Number.

You will see all the interest rate offers in a few minutes. Compare them and choose the one that suits you best.

Prepare Documents

If you have already found the best option, you should prepare to sign the contract and collect all the necessary documents. Usually, banks and other financial institutions ask borrowers to provide a standard set of documents, which include:

  • Proof of identity (ID issued by the government).
  • Confirmation of residence address.
  •  Proof of official employment and income level.
  • Social Security Number.

You will also need to provide the company with your bank account information so they can transfer funds to it. Some financial institutions and loan apps also use information about your income and bank account expenses to determine how much of the loan you can pay each month.

Apply For The Loan

Once all the documents are collected, you can apply for the most advantageous option you have found. To do this, you need to click “Apply,” wait for confirmation from the lender, and sign the loan agreement.

Be careful and read the contract before you sign it. Pay special attention to all fees and penalties, and ensure that the documents contain all the terms you and the lender have approved.

Usually, after signing the agreement, lenders will send the funds to your bank account immediately, but the transfer itself may take a few days.

Where to Get Bad Credit Loans

Unfortunately, you won’t be able to get bad credit loans from all financial institutions, as many of them prefer to work with borrowers with good credit. However, you still have plenty of online companies willing to lend to just about anyone.


Banks provide all types of loans except payday loans, but they rarely work with borrowers with low credit scores. They are more reliable than many online lenders and have better terms, but they also impose stricter requirements on borrowers because of this.

Another advantage of this option is that banks often set lower fees for their loans and allow you to get the money in cash. On the other hand, it is essential to remember that some do not issue loans online, which will cause you to wait in line or even wait a few days for the funds to be transferred.

You should not think that online lenders or credit unions are always less advantageous options than banks. The best solution in this situation is to compare all offers from different financial institutions and decide only which one to get a loan from.

Credit Unions

Credit unions are the best place to get a loan, as these organizations allow you to lend money even to those with a low FICO score. In addition, they often look at the borrower’s credit score and other indicators, which is a plus for people with poor credit.

Another advantage of this option is the low APR. Credit unions are known among people for their favorable terms, so many people strive to get into them. That’s the main drawback of this option – to get into a credit union, you often need to pay a membership fee and meet specific requirements. For example, one of the most famous credit unions, the Navy Federal, provides loans only to the military or people employed in the field and their immediate family members.

Online Lenders

Online lenders are a real lifesaver for those with poor credit, as they often do not check your credit history and allow you to lend money to almost anyone you want. In such financial institutions, you can get a small amount in a loan for several years at a higher APR than in banks or credit unions, which is the main disadvantage of this option.

Also, it is imperative to go to reliable lenders and avoid scammers who ask you to pay loan applications or give you access to your bank account and credit cards. Otherwise, you may fall into the hands of scammers and end up with no money.

To choose a suitable lender, you can read reviews about them on websites and platforms like BBB, Google Play, or App Store.

Types of Loans for Bad Credit

If you have a low FICO score, you’re better off focusing on the few types of loans you have the best chance of getting. We’ll describe each of them in more detail so that you can understand their advantages and disadvantages and choose the best option.

Secured Personal Loans For Bad Credit

You can get up to $100,000 if you apply to a financial institution that provides secured personal loans. To qualify, you must put real estate or other property as collateral, as the lender wants to ensure you pay back all the money when it is due.

This type of loan allows you to borrow money at a lower APR, which is its main advantage. However, it is essential to remember the main disadvantage of this option – if you do not pay back the borrowed funds on time, your property provided as collateral will go to the lender.

You should only choose secured personal loans if you are confident you can repay them when it is due. This way, you will have lower monthly payments than unsecured loans, allowing you to refund the money faster. In addition, lenders are more willing to grant such loans and set less stringent requirements for borrowers, which is also a big plus.

However, be careful and consider the timing of getting the money, which in the case of secured loans can take up to several weeks due to the collateral valuation stage. Therefore, if you need cash urgently, it is better to choose the option described below.

Unsecured Personal Loans For Bad Credit

Unlike the previous option, unsecured personal loans do not require collateral. As a result, lenders providing such loans often work with borrowers with low credit scores but set less favorable terms.

This option has the following advantages:

  • You will have a wide choice of financial institutions, as many provide such loans.
  • You won’t risk your property as you don’t need to provide collateral to get the money.
  • You can get such a loan in as little as one day if you approach a lender who guarantees same-day funding.
  • You can plan your expenses, as these loans are usually repaid in equal payments with a fixed amount.

However, this option also has a few disadvantages. For example, you will have to pay a higher interest rate and have at least 600 FICO points to qualify for most financial institutions that provide personal loans for people with poor credit. In addition, bad credit loan lenders will often ask you to pay an origination fee of 1% to 10% of the amount borrowed, which is also a significant disadvantage.

Unsecured personal loans may also not work for you if you borrow more than $100,000. In that case, home equity loans or other loans with collateral may be a better choice.

Also read: What Is an Unsecured Loan

Payday Loans for Bad Credit

If you need to borrow a few hundred dollars before your paycheck, you can borrow it from payday lenders or install a particular app for instant loans. Typically, these loans are for a maximum of $1,000 and are granted for 2 to 4 weeks at a very high APR of up to 800%.

This option has the following advantages:

  • Most payday lenders do not conduct credit checks and do not have strict requirements for borrowers so that you can borrow money even with poor credit.
  • Many apps and financial institutions allow you to get funds into your account within minutes or hours, which is excellent in an emergency.
  • You will not need to provide collateral to get a payday loan.
  • You only need your ID and Social Security number to apply for this loan.

Of course, it is essential to note that this type of loan is hazardous for borrowers with poor credit because it often leads them into a debt trap. In addition, the high interest rate and additional fees make it challenging to pay back such a loan.

It is also essential to remember that financial institutions specializing in this type of service only lend money for a few weeks, so if you do not have a stable income, you may find yourself in a difficult financial situation because of payday loans.

Student Loans for Bad Credit

As you understand from the name, this type of loan is only suitable for students who want to pay for their education and living while studying. Since they belong to the category of people with no or minimal credit history, they have to approach only lenders specializing in this type of loan, narrowing down the available loan options a lot.

The main benefit of student loans is the ability to pay for the tuition you like. They also have low interest rates and different repayment options, some of which allow you not to worry about the loan until you graduate from school.

However, there are still more disadvantages to this option. Instead of saving to buy your first home or other things for your comfort, you will pay off a considerable monthly loan for about ten years.

Even worse, if you can’t pay back the borrowed funds on time, you won’t be able to get rid of the negative mark on your credit report, which will negatively affect your chances of getting a loan in the future.

In general, many financial experts recommend doing without student loans if you can wait 1-2 years and earn your degree. However, if you want to get a degree now and not lose precious time, you can get a similar loan, for example, with one of your parents as a co-signer under a lower APR.

Auto Loans for Bad Credit

You can use car loans if you need to buy a car and don’t have enough money on your card. As car dealers say, sometimes buying a car on credit is a better solution than paying the total amount simultaneously because you can get additional discounts.

Let’s look at the merits of this option:

  • You can get the car the same month you decide to buy it. All you will need to do is make the first payment.
  • With a loan, you can buy the car you want, not the one you have enough money for.
  • These loans help build a good credit history if you pay them back on time.

Of course, like any other option, auto loans have disadvantages. First of all, it is worth mentioning the high interest rates, because of which you will pay twice as much for your car with a 5-year loan. Also, it is essential to understand that if you buy a car more expensive than you currently can, you will put yourself in a difficult financial situation because maintaining such a car will also be costly.

Financial experts recommend using such loans only to buy a car when you need it for work or your family. They also believe that it is crucial to buy a car that you can afford to maintain and to take out a fixed-rate loan so that you can plan to pay it back.

Home Equity Loans for Bad Credit

A home equity loan is a second mortgage you can get secured against your home a few years after getting the first one. This option will allow you to borrow a large amount of money (up to 80% of your home equity) at a low APR, which is why many borrowers love it.

Of course, this option is best for those who need to borrow more than $100,000. You can divide the amount into fixed payments and pay it off over the next 15 to 20 years. These loans are often used for home renovations or to buy a second home, as there are no other loan options with such low interest rates for people with poor credit.

However, you need to consider the disadvantages of this option before choosing it:

  • Getting a large amount of money can cause you to borrow more than you need and overspend.
  • You may face foreclosure if the price of your home drops.
  • Another large loan always means an extra monthly payment, which can be unnecessary to your income.

Remember that such a loan is also secured, so you should not take it if you are not sure you will be able to pay all monthly payments on time. Otherwise, you can not only ruin your credit history, but you can also lose your house.

HELOCs for Bad Credit

This option is very similar to the previous one; its only difference is that it works on the credit card principle. When you have accumulated equity in your home, you can also go to a lender and set up a certain amount with them that you can spend and pay back as many times as you need over the next 10 (or more) years.

This option is usually best for those who don’t want to spend too much at once. For instance, if you’ve started a home renovation project, you might not want to spend $100,000 right away, which you have to pay back the first month you use the funds, but only $5,000 in the first couple of months. Also, like with a credit card, you will only need to pay APR when you carry a balance of more than one billing cycle.

Cash Advances For Bad Credit

This option is similar to payday loans but allows you to get money faster and offline. To use it, you must find out if this service is included in your credit card options.

The easiest way to get a cash advance is to use the nearest ATM. You must insert your credit card into an ATM, enter a password, and request a cash advance. You will receive the cash advance within a few minutes, regardless of your credit score or income level.

It is important to note that before you request a cash advance, you must determine the terms of use. Pay attention to the interest rate, repayment period, and the maximum amount available; this information is often listed on your credit card issuer’s application.

This option’s benefits include getting money quickly and at a lower interest rate than payday loans. However, at the same time, it is essential to remember that banks usually only allow you to get a cash advance of a couple of hundred dollars for 2-3 weeks, so do not count on this option if you need to cover significant expenses.

Why Improve Your Credit Score

Your score is the primary indicator lenders use when deciding whether to give you money. The higher your score, the better your chances of getting a loan on favorable terms.

You could save thousands of dollars in fees and APRs if you take six months or more to increase your FICO points. In addition, the process is uncomplicated and does not require the intervention of financial experts.

For example, you can download your credit report for free today and see what marks are on it. Next, you can set reminders on your phone so you don’t miss your monthly loan payments or pay off one of your loans to see a significant improvement in your FICO score soon.


More often than not, lenders who provide secured loans have the most specific requirements for borrowers. For example, you do not have to prove a high income or have a good credit score to apply for a loan if you provide the lenders with collateral to guarantee that you will pay back the borrowed funds on time.

Lenders typically allow you to get up to $100,000 if your credit score exceeds at least 560 FICO points. However, the more precise amount depends on whether you provide your property as collateral, your income level, and whether you have formal employment.

First of all, check your credit report and make sure that there are no mistakes on it. If you find them, you can dispute them with the credit bureau and have them removed, as each such mark is usually worth about 100-200 points. On the other hand, if everything is correct on your credit report, start monitoring your loans and paying them off immediately. Then, gradually close your debts to reduce your credit utilization ratio and increase your FICO score.