11 Ways to Get a Loan with Bad Credit (These Work Fast)

Couple applies for loans with bad credit

Applying for loans with bad credit is as simple as applying for any other loan

Bad credit loans are made by lending companies that accept borrowers who’ve had a few problems in the past. These include loan defaults, slow payments, missed payments and even bankruptcies. Credit scores play a big role in how lenders look at your loan application, and a low score could get your application denied. Fortunately, many people don’t have an established credit history or have had a few problems with their credit. Although it can be challenging to find lenders willing to take a chance, there are many companies that lend money to those with poor or bad credit.

11 Ideas Show that Bad Credit Loans Are Really Possible

Bad credit loans are not only possible, but consumers have more options than ever for finding the a company that can meet their financial needs. Many online loans with bad credit–such as short-term payday loans and installment loans–are so easy to get that all you need to provide is proof of income. Even some banks–which traditionally refused borrowers with bad credit and denigrated small-dollar loans–are rethinking their strategies based on the success of the booming alternative lending business.

Critical Information You Need to Know About About Bad Credit Loans

Even if you have poor or bad credit, it may still be possible to get bad credit loans, a bank loan, personal loan or a major credit card. Many companies offer consolidation loans that help people with bad credit reduce their payments and lower their interest charges. All these options are worth exploring, but the following 11 methods have proven to be among the best options for getting bad credit loans:

1. Use Alternative Lenders

Peer-to-peer, or P2P, lending consists of groups of average investors who are willing to lend money online. Sometimes, these lenders lend to specific groups such as women, minorities, new landlords, struggling artists, actors and other demographic and shared-interest groups. Borrowers can post their loan needs on an online platform, and interested lenders can make offers. What’s great about this lending alternative is that borrowers can often get bad credit loans by telling a compelling story. Credit scores still count, but private lenders are usually less strict and more willing to consider extenuating circumstances in your favor.

According to gobankingrates.com, borrowers can qualify for bad credit loans as low as 5.49 percent, but that’s rare and certainly wouldn’t include all people with poor or bad credit, but it’s worth the effort to see what kind of rate you might get. Peer-to-peer lending sites include Lending Club, Prosper, OnDeck, Dealstruck, Peerform and others. However, some of these sites have strict qualifications that you must first meet. Rates, although often lower than some bad credit lenders, can be as high as 36-percent APR.

A blog post at nationalfunding.com reports that the organization’s revenues have tripled in three years. This reflects similar growth patterns for lending clubs. These companies do fairly well in the United States but even better in other countries where government banking regulations aren’t as strict.

2. Join a Credit Union and Apply for a Loan

Credit unions are co-op-based lenders whose members share certain characteristics such as the same job, industry, geographic location and other details. When you join a credit union, you become a member, or part-owner, which allows you to borrow at reduced rates. You might be surprised at how easy it is to become a member. Some car dealerships can make you members of a credit union when you buy a car. Most credit unions only require a small deposit to become a member–as little as $25. After becoming a member, you can apply for a loan with a better chance of being approved at a lower interest rate than most lenders would charge.

3. Get a Collateralized Loan

Putting up collateral for a loan reduces the lender’s risk, so they’re usually able to ignore bad credit and even give you a reasonably low rate of interest. Mortgages are a specific type of collateral where your home, business or other property serve as a guarantee that you’ll make your payments. If you don’t, you could lose the property. Loans are available for all kinds of valuables and personal property such as real estate, business machinery, farming equipment, valuables and collectibles, investments, insurance policies, boats, automobile and others according to an article posted at thebalance.com.

4. Enlist the Support of a Trusted Co-Signer

A parent, spouse, child, sibling or more distant relative or trusted friend might be willing to co-sign for your loan. The co-signer must have excellent credit, and both of you sign the note. As long as you make the payments as agreed, the co-signer will only be notified when their obligation is over. If problems arise, the lender will try to collect from you first before billing the cosigner. Both you and the co-signer are legally responsible, and both can be pursued for payment based on all available legal options.

5. Borrow from Family or Friends

Family and friends are often willing to provide cash loans. These can prove problematic if you don’t repay the loan, and financial issues often drive wedges between former friends and family members. In some cases, you might agree to the loan informally, but the better option is to make the loan legal. Write a contract, define a rate of interest, set repayment terms, calculate penalties for late payments and get the contract notarized. You don’t have to enforce the contract, but it’s there if either party needs legal protection.

6. Ask Your Employer for a Loan

Employees worrying about a financial crisis tend to work less efficiently and make on-the-job errors. Many employers are willing to make small loans to their staff, which they can deduct from the borrower’s paycheck in a lump-sum or installment payments. Employees with financial troubles might need to repair their cars to get to-and-from work, so many companies are willing to float loans for their hardest working employees.

The terms of employer loans can vary widely. Some companies only charge a few dollars to cover the paperwork according to creditcards.com. It’s recommended that a prospective borrower conduct a little research to find out if this option is commonly available. If it is, the terms might be posted online or available through the HR department. However, if the company is small, you can probably just ask the owner.

Creditcards.com recommends that you and your employer spell out what will happen if you leave the company or get fired before repaying the full amount of your loan. Most employers might try to debit the remaining balance in full from your final check, but if you have a legal repayment schedule defined in your contract, that action might not be legal.

7. Check out the Online Options for Loans for Poor Credit Borrowers

The options for loans for poor credit borrowers have never been as diverse as today. Payday loans, online personal loans, installment loans and other financing are readily available. Short-term loans, which include installment, payday and automobile title loans, usually charge higher rates of interest, but their loan-approval rates tend to be higher. Shop around online to see what’s available.

Payday loan companies offer some of the easiest-to-get loans with bad credit. The application process is streamlined, borrowers don’t need to fax paperwork and the higher interest rates of these short-term loans reduce the lenders’ risks so that they can approve more applications than traditional lenders. The amount of these loans usually ranges from $100 to $1,000.

Some of the loan products that short-term lenders offer include personal loans, installment loans, payday loans, credit cards and Native American tribal loans. It’s important to read the contract and fine print, check out the lender’s reputation and find a company that will look beyond your credit score. Look for companies that are very upfront and transparent about their fees, and watch out for predatory lending practices that are designed to keep you borrowing so that you remain in debt.

Personal loans offer many advantages for bad credit borrowers. Personal loans usually have longer repayment periods than other short-term loans. This might make repaying your loan easier with a manageable stream of payments instead of a large lump-sum payment.

8. Using a Third-Party Loan-Finder Service

Loan finder services can consolidate potential lenders and save you time, but you still need to do your own research and apply for a loan at each lender. Although third-party services save time and consolidate lists, they’re not empowered to grant credit or make guarantees. However, they can speed the process for collecting potential lenders that meet some of your borrowing criteria. You might not find a perfect match, but landing a loan might be worth paying higher interest rates or repaying your loan more quickly than you had intended.

There are independent companies, those that specialize in mortgages and loan-finders that work with short-term loans, payday loans and loans for bad credit. Even Experian, one of the three major credit reporting bureaus, operates a loan-finder service according to experian.com

9. Tap the Equity in Your Home

Buying a home is probably the greatest business transaction in dollars that most families ever do. Your home becomes an important asset and reflects your identity, values and living preferences. Poor credit borrowers might have bad records for one reason or another, but many people still have their homes to leverage when other methods fail. You can get a second or third mortgage or refinance your home to tap into the equity that you’ve built. Equity is the difference between what you owe on your mortgage and the home’s current value on the market. You can get a home equity line of credit if you have at least 20 percent equity in your home according to gobankingrates.com.

10. Apply for a Credit card

There are hundreds of credit card companies and many of them are willing to provide credit to people with poor or bad credit. This option can also be used in conjunction with other methods of getting a loan. For example, you could get a credit card based on another person’s credit as a second or third user. Credit card offers include small-balance cards that offer credit from $200 and up as alternatives for loans with bad credit.

Some companies offer credit for people who are willing to open a secured bank account. The bank account is held as collateral for the credit that the card company extends. Once you’ve proved reliable, the account’s secured status is removed, which gives you access to those funds. Some new credit cards require you to build a reliable payment history before you can get a cash advance.

11. Improve Your Credit Score

Regardless of how easily you can get bad credit loans, you’ll usually pay higher interest. You could also be denied credit based on a really weak credit profile and short employment history. That’s why improving your credit score is so important for getting approved for the best possible rates on any loan. According to credit.com, the following score ranges fall into bad, poor, fair, good and excellent credit categories:

  • Excellent: 750 and higher.
  • Good: 700-749
  • Fair: 650-699
  • Poor: 600-649
  • Bad: 600 and lower

Any score below 649 might mean that you’ll have trouble getting approved at traditional banks and other low-interest credit providers.

Loans with Bad Credit Are Available for Consumers and Business Owners

There are many additional options for loans with bad credit for someone who owns a business. These include raising capital through crowdfunding platforms like Kickstarter and selling your unpaid customer invoices in a process called factoring. There are also ways to raise capital by attracting investors and finding a business partner. Business loans online include most of the same loan products that are available for consumers with some added options such as the Small Business Administration.

For consumers, loans with bad credit can prove to be necessary lifeline. Emergencies happen, cars break down, appliances need repairs and the roof might literally crash to the floor. Medical emergencies, stranded students and time-sensitive opportunities can result in both businesses and consumers needing cash to manage.

Regardless of your needs, online technology and expanding global lending options ensure that there are many more loans available for poor credit borrowers than there ever were in the past.