Resourcefulness in the 21st Century (How to Get a Loan with Bad Credit)


The famous adage is that tough times don’t last – tough people do. In the digital world of the 21st century, this phrase should be updated. Instead, we’d be wise to remind ourselves that tough times don’t last – resourceful people do.

This is the dilemma of those with poor credit. Consumers need to understand how to get a loan with bad credit or, on a lesser scale, how to get a small loan with bad credit. 

A 2015 study released by the Pew Charitable Trust reported that, “Over the past 30 years, American families have taken on increasing amounts of debt. Today, 80 percent of Americans hold some form of debt, most often mortgages.”

With so much of our annual expenditures consumed by mortgage payments, there is often little remaining to cover all other necessities (e.g., groceries, utilities, transportation, etc.).

Emergencies are inevitable expenses, and when one arises, someone with a poor credit history will be asking the question of how to get a personal loan with bad credit.

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How to Get a Loan with Bad Credit

Borrowing becomes difficult when the challenges of the past have eroded your credit score. Those facing unforeseen, critical expenses need a resource in understanding how to get a loan with bad credit. In this article, we’ll explore 6 key ways you can secure a loan despite being plagued with a low credit score. Even those interested in learning how to get a small loan with bad credit will need to exercise a few of the principles reviewed here.

It’s important to understand that researching how to get a personal loan with bad credit means researching risk. When engaging in low-credit-score borrowing, you’re exposing yourself to some risk. This risk often comes at increased liability, exposure of assets, penalties, high fees, and other pitfalls that we’ll also explore in our review of how to get a loan with bad credit.



Borrowing from Your 401(k)

This now common perk of the 21st century workplace is an often ignored resource for those in need of quick, short-term funds. When asking how to get a small loan with bad credit, look here first. This option offers fewer expenses than what you’ll find with the high APR values seen in some of the other options reviewed later in the article.

How to Get a Loan with Bad Credit

Image Source: How to Get a Loan with Bad Credit

Nearly all 401(k) plans offer borrowing options. Traditional 401(k) plans will permit account holders to borrow up to 50% of their total balance. This option, however, maxes out at $50,000. This loan is usually executed fast. Though larger borrowing is feasible here, it is better to consider this option when focusing on how to get a small loan with bad credit – you’ll need this money for retirement, after all.

Wondering how to get a loan with bad credit when a bank might disapprove of your credit score? The answer: there is no bank approval necessary. As a result, your credit will not be a factor in the decision. This is for the simple reason that the funds in the account are acting as the collateral. Avoiding a credit check has the added benefit of preventing a negative impact that builds with repeated credit checks.

This strategy also answers the question of how to get a cash loan with bad credit as the funds often reach the borrower’s account fast. Repayments are automatically deducted from your paycheck. Your 401(k) administrator can explain how to apply for a loan with bad credit via this option. As with any loan, there are interest rates to consider but often very few fees.

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Obtaining a Co-Signer

This practice demystifies the question of how to apply for a loan with bad credit. If borrowing much-needed funds from family or friends was an option, you likely wouldn’t be reading this article. However, if they are unwilling to extend the money themselves, they may answer the question of how to get a bank loan with bad credit by offering to co-sign a loan.

The requirement of a co-signer arises when the applicant fails to meet the criteria for a loan. Examples include:

  • Poor credit
  • An excessively high debt-to-income ratio
  • Falling below the minimum income requirement
  • Unemployment


Regular, on-time payments will lift your credit score over time. This is a common practice for those seeking fast resolutions to the problem of how to get approved for a loan with bad credit because it allows someone else to help lift you up another rung of the ladder.

However, it is important to take caution. The family member or friend who co-signs will be held legally responsible for this debt. The co-signer’s assets will also be reviewed in this process. Therefore, respect your co-signer.

Obtaining a co-signer is a bold step for those stuck asking themselves how to get a loan with bad credit. The reason is there is absolutely no advantage to co-signing on a loan. There is only a downside for the co-signer in the event that you fail to pay on time. Even when using a co-signer with stronger credit, you will likely be subjected to a higher interest rate as your low credit score will still be a factor.

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Using Peer-to-Peer Lending

This is one of the newest ways to borrow. It offers speed, simplicity, and an opportunity for those researching how to get a personal loan with bad credit. With this option, there are fewer steps to block your progress towards a loan.

Your low credit score will still be a consideration, but you’re not working with a bank in the traditional sense, where your credit score will be reviewed. The “peers” lending to you may be more comfortable with the risk than a bank would be. A conventional bank loan is subjected to greater scrutiny, and banks must follow a longer list of protocols. A bank doesn’t want to hear you ask how to get approved for a loan with bad credit.

Interest rates on peer-to-peer sites can be as low as 6.5%, but those with poor credit can expect higher rates. If you want to know how to get a small loan with bad credit fast, the best answer may be peer to peer. Online lenders are attracted to the high risk of lending to those with bad credit. Why? They can command a higher rate and thus a greater return.

Consider this worthwhile alternative. Some of the industry leaders in this emerging field (started in 2005) are sites like:

The general interface is consistent among these sites. Borrowers post their loan needs with a description of what the loan is for. The lenders assess the risk and make offers. Like all other loan options, there are repercussions for failing to pay on time.

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Tapping into a Credit Union

Credit unions are more accustomed to working with people that are asking how to get a personal loan with bad credit. As a result, you may find more flexibility here. The benefit to a credit union is seen in the ways it differs from a traditional bank. The members of a credit union are also the owners. Those belonging to the same credit union often share a common trait, like working in a specific industry or living in the same geographical region.

Personal Loan with Bad Credit

Image Source: Personal Loan with Bad Credit

When searching for answers to the challenge of how to get a personal loan with bad credit, a credit union can be a valuable resource. Credit unions can offer significantly lower costs and rates because they are nonprofit entities. They will likely apply similar rigor when reviewing your application. However, since they are smaller than banks, they may be willing to be more flexible with lower score candidates.

The lower credit union rates, compared to banks, are evident in research conducted by the National Credit Union Administration. Look at the comparisons below to see how much cheaper credit unions are:

  • Car loans: 2.71% vs. 5.26%
  • Credit card loans: 11.55% vs. 12.89%

When asking how to get approved for a loan with bad credit, first ask yourself if a credit union is available. The value here is that you’ll be viewed less as a number and more as a person. Though a bad credit score will be a detrimental, you’ll have more opportunities to present yourself as a reasonable borrower.



Getting a Home Equity Line of Credit

If a bank doesn’t see reliability in you, it may see it in your home. This is a great way to tap into the value of your house to access cash. Your home serves as the collateral for the loan. Equity plays a critical role here. Equity you’ve built over the years will help improve your overall risk profile even when hampered with the question of how to get a loan with poor credit.

When you ask yourself how to get approved for a loan with bad credit, look to your home. If you have a large amount of equity in your home, your viability improves. The maximum borrowing you can expect with this option is 80% of the value of your home. Those who own 20% or more of their home are often deemed as lower-risk candidates. This is how you offset a weak credit score when researching how to get a loan with bad credit.

One sum of money will be issued to the borrower. A regular payment schedule continues until the total amount is paid. A fixed rate is used over a period lasting 20 to 30 years.

Another version of this practice is to open a home equity line of credit (HELOC). This may lessen the stress of managing decades of payments. Why? With a HELOC, the borrower can withdraw money as needed instead of as a single lump sum. A HELOC is a good fit for those who approach the question of how to get a loan with poor credit with a measured approach.



Accessing Low-Credit Lenders

This is perfect when asking how to get a small loan with bad credit. Some have referred to this practice as “glorified payday loans.” While this option does invite comparisons to the much-maligned practice of a payday loan, there may be some value to using a low-credit lender. Online, low-credit lenders are designed for people plagued with the question of how to get approved for a loan with bad credit.

Low credit scores are often less of a factor. In return for looser restrictions on candidate profiles, you’ll face these characteristics:

  • High APR
  • Low dollar value of borrowing limit
  • Short-term repayment
  • Added extra fees

For those in need of a quick solution to the problem of how to get a personal loan with bad credit, look here. This is best for those only in need of low sums like $250–$1,000. Approved applicants can have access to the funds in as little as 1 day if they meet the criteria.

There are some long-term benefits here. Borrowers may be able to distance themselves from the worry associated with asking how to get a loan with bad credit by gradually improving their credit score. As repayments are made, often in smaller sums, an applicant can reap the benefit of an improved credit score. These regular payments will be much more feasible with a low-dollar loan like those provided by low-credit lenders.

Some low-credit lenders include:

Before using these sites as an answer to how to get a small loan with bad credit, take special caution to understand not only the high APR you’ll be subjected to but also the true total dollar value repaid. Other fees can apply and are, at times, significant. Research this also if you’re serious in your quest to understand how to get a personal loan with bad credit.

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Pitfalls When Asking How to Get a Loan with Poor Credit

Poor credit is risky. Borrowing with poor credit is riskier. Instead of asking yourself how to get a personal loan with poor credit, first ask, “Do I really need a loan?” If your credit is poor, you’ve likely made mistakes in the past. Mistakes are often repeated. The real answer to the question of how to get a loan with poor credit is to improve your credit.

Do not engage in any of the above unless you are truly in dire need. When a score drops far enough, even high-risk lenders will ignore you. While there are options for low-credit borrowers, they are nearly all expensive. Watch out for:

  • High APRs
  • Hidden fees
  • Additional credit checks
  • Late payment penalties

In the future, prevent poor credit. You can do this by avoiding the temptation to close an account. This may stop spending but will harm your credit score. Also, even if you’re making payments on time, always leave some available credit unused. This will improve your score.

Try to choose lenders that only perform a “soft pull” on your credit. Hard credit checks adversely impact your score. Get your free credit reports from Transunion, Equifax, and Experian and review for inaccuracies which can easily be fixed.



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