Don’t let a low credit score stop you from getting a personal loan. Personal loans can be lifelines for emergencies, help finance big purchases, or consolidate debt. But they’re not always easy to get if you have a bad credit score.

Credit scores span a range of 300 to 850with scores below 670 typically categorized as “low.” While a low credit score might pose challenges in securing a conventional personal loan, it’s important to note that it doesn’t render loan approval impossible.

5 steps to get a personal loan with bad credit

1. Know your credit score

Lenders typically have a minimum credit score threshold, and if your score falls below it, your application can be denied. Many financial companies, including ChoiceCreditScore, provide access to your credit score and AnnualCreditReports.com offers a free detailed credit report. Take a look at your report, and if you find any errors, request corrections since fixing them can boost your credit.

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2. Find lenders specializing in bad credit loans

Not all lenders have the same requirements when it comes to personal loans. Research and identify lenders who specialize in working with borrowers with less than stellar credit:
– Online lenders
– Credit unions
– Peer-to-Peer lenders
– Family and friends
These tend to consider alternative criteria like employment stability, income, education, and banking history, as well as your credit score. 

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3. Prequalify for loans and compare

No two lenders will offer the same rates so it pays to compare options. Before you apply for a loan, check if you prequalify. This will let you see the loan amount, rates, and repayment terms without hurting your credit score. When you do apply, the lender will do a hard credit check which temporarily lowers your credit score. Prequalifying lets you see if you can get approved and compare loan rates and terms without hurting your credit.

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4. Consider collateral or a co-signer

Look into co-signed, joint, and secured loans. Lenders are more likely to approve co-signed or secured loans with better rates because they lessen the risk to the lender. If you don’t pay, your co-signer will have to pay the loan or the lender can seize your collateral. Lenders will review the co-signer’s financial details and/or the collateral value (home, vehicle, assets) for approval and rates.

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5. Apply for small loans

Ask only for what you need and can afford to repay. If the lender thinks the amount you asked for will overextend your finances they are more likely to decline you.

Instead, ask for a smaller amount and be sure to add all your income. This includes nonemployment income like alimony, child support, retirement, or Social Security payments. Responsibly managing a small loan can build trust with lenders and lead to larger loan approvals in the future. 

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Final Thoughts

Getting approved for a personal loan with bad credit can be tough but it’s certainly doable. With some work on your credit, the right lenders, and a little help from your friends you should be able to get approved.